The 14x Dollar-Growth Potential of Gen Z

Gen Z, with its oldest members graduating from college and its youngest still in grade school, has been the latest puzzle retailers have been trying to solve in terms of marketing and building connections. IRI offers some recommendations and insights into this influential generation—which account for 20% of all U.S. consumers, with an estimated direct buying power of $143 billion—in its recently published white paper, “Understand Me, Don’t Define Me.”

“[Gen Zers] are known for their work ethic, technology prowess and passion for action,” Lynne Gillis and Jennifer Pelino of IRI and Janis Gilman of The Female Quotient write in the white paper’s summary. “Moving away from labels and toward the future of data will successfully guide CPGs and retailers that want to market to Gen Z. … Brands that make the connection with this remarkable generation drive, on average, 14x greater dollar growth opportunity vs. other generations.”

Some ways retailers can build that connection with Gen Z, IRI notes, are through discovery, authenticity/transparency and in-store experiences.

Emphasize Discovery

Discovery plays an important role in shaping Gen Z’s brand and shopping experiences and how they ultimately become loyal customers, IRI notes in the white paper.  

“At its core, discovery is play—and [Gen Zers] love to explore,” the white paper reads. “While they are a generation hard-wired for seriousness and diligence, discovery within the world of CPG products is a low-risk way for them to experience the fun of trying something new.”

There are two components of discovery: visual and connection.

The visual aspects of products and their merchandising is a huge component of discovery for Gen Zers, who are very aware of product packaging and the messages it sends. IRI says, “Don’t be the brand that touts sustainability and then uses multiple layers of plastic in packaging; these ‘tells’ immediately undermine a brand’s credibility with Gen Z.”

Both personal and social media connections play a role in Generations Z’s shopping experience, but organic recommendations from family and friends carry more weight. Fifty-nine percent of Gen Zers said recommendations from friends and family would most likely get them to buy a product, followed by 54% who said seeing a friend/family member using the product would. Rounding out the top five were TikTok videos (39%), in-store displays (38%) and TV advertisements (31%).

Be Authentic and Transparent

One of the defining characteristics of Gen Z is its commitment to individuality, human rights and equality, and as brands and retailers look to capture this generation’s attention, IRI said it might be tempting to focus on a gender-neutral or gender-fluid approach but in actuality, how gender is portrayed in brand marketing and communications has little influence over their purchase decisions.

“Brands being obvious about calling out diversity and fluidity is distracting and feels inauthentic. We want to see real people using real products that actually work,” a Gen Z focus group participant told IRI.

“The consistent feedback we heard from Gen Z was that gender in marketing isn’t as much about whether brands are portrayed as male, female or gender neutral,” IRI said in the white paper. “Rather, it is whether the entire ‘package’ for the brand—everything from what the product is, to how it performs, to how the packaging looks, to its marketing and social media—is simple and authentic and makes sense for what the brand is.”

Part of being authentic also means being transparent. Gen Zers, in particular, want functional products that also give back to society, IRI notes. They are also drawn to simplicity in packaging, which can convey and eco-friendly message.  

“Spend 10 minutes talking to any Gen Zer and it will be obvious that they hold brands and retailers to a much higher standard of transparency, social responsibility and product efficacy than those in preceding generations,” IRI said.

In-Store Importance  

While Gen Z is a particularly tech-savvy generation, this group has not shied away from brick-and-mortar. IRI notes that more than half of the 17- to 23-year-old females it surveyed displayed a preference for in-store shopping as opposed to only one-third who preferred e-commerce. One of the main reasons for this is in-store shopping more easily lends itself to a “multi-sensory immersion.”

“Shopping in-store isn’t just a means to an end, it is an experience that gives them an opportunity for fun, socializing and experimentation,” IRI notes, adding that it also provides Gen Zers with a sense of immediacy and control.

“For some, especially during the pandemic, grocery shopping has been an almost therapeutic, relaxing experience. It is a forum for them to explore and find what they want, and, not inconsequentially, it allows them to get out of the house,” IRI continued.

To make the in-store shopping experience more enjoyable, the research firm suggests retailers focus on navigating the store.  

“This generation has grown up in a world of online shopping, so navigating the store is not always second nature. Departmental signage and aisle markers are among the most widely used in-store promotion vehicles that [Gen Zers] notice,” IRI said. “They also interact with technology-driven vehicles (e.g., computerized information/coupon center, video monitor displays and advertising on shopping carts) more than other generations.”