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Watch Out Here Comes Generation Z Meet Your Newest Shoppers
Paul Schlossberg You should know a lot about your most important shoppers. That group includes the Baby Boomers (born 1946-1964), Generation X (1965-1980) and Millennials or Generation Y (1980-1996). 1 The Boomers have been your primary customer base for a long time. Now, at many of your locations Gen Y and Gen Z are the dominant groups you are serving. As an industry we've had to adapt to differences in taste and product preferences. This occurred when these new generations came into the workpla...
September 16, 2018 | Paul Schlossberg
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| Paul Schlossberg |
You should know a lot about your most important shoppers. That group includes the Baby Boomers (born 1946-1964), Generation X (1965-1980) and Millennials or Generation Y (1980-1996).1 The Boomers have been your primary customer base for a long time. Now, at many of your locations Gen Y and Gen Z are the dominant groups you are serving.
As an industry we've had to adapt to differences in taste and product preferences. This occurred when these new generations came into the workplace and at other locations where we operate. We've had to adapt to changing demographics – more women, immigrants from around the world and demands for ethnic cuisines we had never offered in the past. We've written about these developments here in articles and blogs.
Think back to how you adapted when Generation X began shopping in your stores. How did your product selection and merchandising change? Next, consider how your business changed when Millennials walked in to your stores. Each group had a new set of expectations, different from what had made us successful in the past.
As Gen Y moved on from high school, some went directly to work. Others entered college, going to work a few years later. Our industry was not alone in having to find new solutions as the new age cohort became our day-to-day shoppers. It took new thinking leading to new products, new equipment and other innovations for us to step up to the future.
Guess what? Once again, just as we think that we have a good grip on how to make it all come together – it's all about to change. The Eagles said it very well. "There's a new kid in town…"2 For our industry, that 'new kid' is Generation Z. They are here. And they will be your newest customers.
Let's Meet Generation Z
Generation Z was born after 1994. The leading group from this cohort is now about 24 years old. You might already know something about them. Some might be the newest shoppers at your sites. A few might be working in your organization. Maybe you have children, nieces or nephews or even grandchildren who are in Gen Z.
Think about Gen Y for a moment. There has been much written and reported about the Millennials. By now we should be well prepared in dealing with the shopping needs of our current and primary shopping group.
How much do you know about Gen Z? What are your expectations about how Gen Z will change what you sell and how you sell it? Do you have locations where Gen Z is exerting an influence on your merchandising and product mix? Colleges would be a prime example of where we are actively engaged with Gen Z shoppers.
Generation Z is headed our way bringing big spending potential with them. According to a report by Packaged Facts,3 this age cohort has buying power of more than $500 billion and accounts for 16% of US population. By the way, they are increasingly cashless when it comes to what we offer.
Maybe you think it will be easy to make Gen Z shoppers happy with the same things we've done for years. To dispel that thinking, you might want to read "Move Over Millennials, It's Gen Z's Turn to Kill Industries" from Bloomberg.com, posted on August 7, 2018.
One key point from the article relates to the payment preferences of Gen Z. According to Stuart Sopp, the CEO of Current, "This generation has grown up with a mobile device that is also a payment device. They are going to accelerate the adoption of the digital economy because digital payment is native to them."
A report, from Altitude, provided more insights into Gen Z. The title was "What Is Gen Z, And What Does It Want?" There were a few interesting take-away points which we can learn from:
1. They have "highly evolved "eight-second filters." They've grown up in a world where their options are limitless but their time is not. As such, Gen Z have adapted to quickly sorting through and assessing enormous amounts of information." With a smartphone and the skills to apply technology, Gen Z can readily deal with what we call 'information overload' – and they can do it quickly.
2. While "we" perceive them as being online all the time, the report notes that the reality is that the Gen Zs are "full-time brand managers." They are actively and frequently managing their persona and messaging online. It applies to both their personal and business "brands." One of the biggest issues we will have to deal with is how our (business) brand relates to their brands.
3. "They're practical pragmatists." This group has a career and work focus. The changes in the working world are on their collective minds. It's dealing with robotics and automation and how that will impact employment. It's about having a stable job. Ultimately it's about how you will attract young people from Generation Z to work in your organization.
How Does Gen Z Relate To Retail and Foodservice
Food Business News reported about a study from NPD. The headline was "Why food manufacturers should be targeting Gen Z." Their attitudes about brands and branding are different from older generations. We need to be sensitive to what these differences will mean in our day-to-day business.
The report goes on to say "Gen Z consumers also differ from millennials in their attitude toward large brands. While millennials tend to favor smaller, niche, local brands, Gen Zs choose brands based on different criteria. NPD said "In many ways Gen Z consumers think of themselves as having a personal brand with a story and values by which to live. They seek brands that support their story, and they are willing to use them regardless of a brand's size."
There is really good news for us in the NPD report. Gen Z as a group are snack-oriented. They like ready-to-eat (RTE) food and snacks as part of meals or for snacking. What we sell is pre-packaged. In that respect, we are in a good position to meet the needs of Gen Z when they are hungry, thirsty or just craving something sweet, salty or savory.
Another report, "Gen Z: The TotalSocial Generation," from Engagement Labs, points out that Gen Z "is expected to account for 40% of all consumers by 2020." This report, from Engagement Labs, is a highly relevant for our business. You can, and should, learn more through their website.
While food is important to them, as we will see, tech comes first. When Gen Z talks about brands, it's the iPhone and Apple at the top of the most frequently discussed brands. According to the report some major retail brands are trending down among teens – that's Gen Z. That list includes: Nordstrom, JCPenney, Kohl's, Macy's, Kmart, Sears and TJ Maxx.
We should be paying attention to the upward trend line of Gen Z conversations about convenience stores and chain drug stores. "7-Eleven is up by more than 300% among Generation Z in terms of the frequency of conversation, while Aldi's, Walgreens and CVS are also posing double and triple digit gains."
They think about food often. The report went on "Today, compared to 2013, nearly every restaurant is being talked about more often by Gen Z. Conversation levels among teens have literally tripled-or more -for several restaurant chains: Baskin & Robbins, Del Taco, Domino's and California Pizza Kitchen."
Are your Gen Z shoppers on social media sharing their thoughts and pictures of your products and equipment? Did they tell a friend or colleague about something they purchased and enjoyed from a vending machine, micro market or the OCS? There are operators who have established and maintain a strong, positive social media presence. If you're not doing it, now is the time to get engaged.
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In 2012, the oldest Gen Zs were about 18 years old. Today they are joining the ranks of our shoppers. We have a much better understanding of Generation Z and how they will influence the food industry. There are some parallels between the behaviors and preferences of Millennials as compared to Gen Z. But it is the differences that will drive our industry in new directions.
Our competition is dealing with exactly the same challenges. That's the good news. Those competing channels and companies are investing heavily to reconfigure everything they do. That's the bad news, because many of those competitors are multi-billion companies with big money allocated for future initiatives. Let's look at a few examples:
1. Stores are being redesigned and remodeled for the future. At qsrweb.com there was a report that McDonald's will invest $6 billion through 2020 to reconfigure their stores with new interior and exterior design and décor, digital ordering with self-serve kiosks, table service, expanded McCafe sections and more. They are calling it the 'McDonald's Experience of the Future redesign." According to Restaurant Business, "Subway and some of its vendors are investing $80 million to make changes and add elements to nearly all of its 26,000 U.S. restaurants by next summer" (2019).
2. Menus are being changed as consumer expectations evolve. We know well that 'clean' labels, fresh food and healthier eating patterns have forced our industry to adapt. It's the same across the restaurant business. McDonald's is now rolling out "…cooked-to-order Quarter Pounder hamburgers made with fresh beef," according to USA Today (May 2, 2018).
3. Social media is the great equalizer for brands. Even a small brand can become visible on social media for a relatively minor investment versus traditional paid media. Lyfe Marketing published a comparison of media cost per thousand impressions (CPM).4 They shared an analysis showing that the CPM for social media was $2.50 versus $57 for direct mail or $16 for either newspapers or magazines. According to Recode, in 2017 for the very first time, "Digital ad spending reached $209 billion worldwide – 41 percent of the market… while TV brought in $178 billion – 35 percent of the market…" We can see from the data that big advertisers are shifting to digital advertising and away from broadcast television adverting.
An Action Plan for Gen Z
Here are a few first steps on the path to get your stores ready for Generation Z
1. How are you doing with the new 4-C's? That is: Connect-Communicate-Customize-Cashless. You need all four on your immediate priority list. We must be connected to our shoppers, especially Gen Z and Millennials. It must be easy for them to interact with us.
2. Cashless is good. Being able to accept digital payments (obviously from smartphones) is mandatory for your future relationship with Gen Z.
3. How does our brand relate to our (younger) shoppers? Are we doing "good" things and sharing the news on social media?
4. Generation Z and their expectations and needs can teach us how to be a better employer – and how to attract young people to work in our industry.
5. What are your plans for the "(fill in your company's name here) experience of the future?" Pay careful attention to what competitive channels are doing with their menus, store remodels and social media presence. You must be relevant to the shoppers you serve with your physical stores, your menu and your social media presence and capabilities. If the competition is "getting better," we cannot afford to be standing still.
6. We've written previously about how and where to find brands and products which not being sold (yet) in our channel. As Generation Z grows to be a bigger proportion of your site populations, you will have to ever-vigilant in identifying and sourcing new products.
Sooner than we might expect the young men and women of Generation Z will become a very important proportion of our sales. Over the next few years we will have to adapt and adjust almost everything we're doing to satisfy the thirst and hunger of Generation Z. If we succeed at solving the riddle of Gen Z, we will be happily on the way to selling more stuff.
1 The age range (and birth years) definitions for Generation Z (and other age cohorts) will vary depending on the sources and studies being referenced from demographic analyses and market research reports.
2 "New Kid in Town" is a song by the Eagles from their 1976 studio album Hotel California. It was written by Don Henley, Glenn Frey and J.D. Souther.
3 "Looking Ahead to Gen Z: Demographic Patterns and Spending Trends" a report from Packaged Facts
4 CPM is used in advertising to determine the cost, in dollars, to reach 1,000 people. It allows advertisers to compare their spending effectiveness in delivering a message to their target audience at the lowest cost.
» Paul Schlossberg is president of D/FW Consulting, working with clients to merchandise and market products in impulse-intense selling environments, such as vending, onsite foodservice and convenience stores. Based in the Austin, TX, area, he can be reached at Paul@DFWConsulting.net or (972) 877-2972 or www.DFWConsulting.net.
