Gen Z Goes Phys-igtal

Youth has beauty, energy and … money? Plenty of it, it seems.

In the latest Data Drivers, Sandeep Bhanote, CEO of Radius8, noted the spending power, and power to influence commerce, that the younger generation holds.

The company is in the business of using a variety of local and contextual data to drive value for retailers across the physical and digital channels, with an eye on generating more sales in environments where consumers are readily available, such as Facebook.

These young spenders are part of Generation Z. Who are these people and where do they hang out? They are traditionally defined as people born after the mid-1990s through to the early 2000s, and, as Bhanote explained, “They don’t know a disconnected world. They know iPads, they know digital, they know web.  They were born with the internet in the umbilical cord, if you will.”

These connected souls value the experience of being connected, said the executive. And when they shop, they are looking for an experience in-store that is like, or connected outright, to the world they know online.

“What’s also important to them is social approval,” he said, and physical stores have struggled with how to effectively embrace these users as they look for life and interactions “beyond the click.” In fact, a majority of Gen Zers admit to shopping in physical stores at least some of the time — a whopping 98 percent of them, all told, searching “beyond the ‘buy button’” for an experience that takes place in three dimensions.

That, in fact, was Data Point #1: 98 percent of Gen Z shops in physical stores — a stat that may bear repeating because, well, it’s so significant on its face.

Webster noted that one problem in the physical shopping realm is that stores do not create experiences for the shopper. Concurred Bhanote, “if you go into a Sears, it is depressing.” The assortment of merchandise and the layouts are lacking.

But conversely, he said, firms like Ulta Beauty offer examples of “a phenomenal job, not only with their digital strategy but with the physical store strategy, where they’ve got a mobile app, they’ve got … offers” to help drive loyalty; and they have a focus on in-store experiences via “additional services, so when you come into that store, they know who you are,” even while tying it all to a digital experience.

Data Point #2: $44 billion

They are young and not working. And they rely on Mom and Dad to foot the bill most of the time; but that does not mean that the Gen Z cohort does not have access to money — and, in fact, in terms of spending power, the tally comes to about $44 billion, nothing to sneeze at. That dovetails with the $829 billion in indirect influence that is estimated to be swayed by the same young Turks.

The numbers don’t surprise Bhanote, who gave examples of Apple and Microsoft, which allow for “permission-based” commerce platforms that can contact parents and ask for permission when the Gen Z users seek to buy something online — in essence, you enroll your family in an account linked to a credit card, “and with the touch of a button,” Dad gets asked for permission for the purchase. Said purchase (along with, sometimes, begging) is parentally approved (or not), eliminating friction in the process. And this frictionless experience translates well into an in-store setting, said the executive.

How can all this impact what the parents and the adults may be buying? Generation Z is populated by influencers who use social media to shout out to the world what they love and what they loathe. And the brands themselves can use social media to broadcast the value of their brand or to extend the social consciousness of that same name.

Data Point #3: 69 percent

This is the percentage of dollars raised by retail startups with funding through VC backing that are being used to open stores where these experiences can come to life, said Webster.

Some brands, such as Warby Parker, said Bhanote, have operated in the digital space and are now contemplating the physical store experience through a different lens than might otherwise have been used.

Firms such as these, he noted, are going to define what the new role of bricks-and-mortar will be and is becoming. Of note: Amazon has been making that leap. And other retailers are recognizing that customers from this generation are tied to both buyers — that’s the parent, again — and influencers (peers but also influencing extended family). For Radius8, the key concern is how consumers can “discover digitally … and buy digitally or physically.”

For traditional retailers, the question remains: Can they make the shift in embracing not just the digital world but the Gen Z denizens who inhabit both worlds? Said Bhanote, within some firms, the fact that Gen Z is looming and looms as a revenue opportunity “is forcing these [companies] to reorganize themselves.” Some companies have a digital group set up to address these challenges and opportunities, but the worldview needs to converge across operations to focus on the consumer and their desires.

The key, beyond making the sale to the customer, is to discover “what is important to them and to their life,” where social media can capture “micro merchandising opportunities” that can be realized in stores, or out of them.

Such awareness of customers can help drive more traffic into physical stores, but also drive better digital outcomes, all through what the CEO likened to “localized experiences.”