How to Invest in the Next Generation? Exploring Brands Popular Among Gen Z in the U.S.
Generation Z (often shortened to Gen Z), the demographic group succeeding Millennials and preceding Generation Alpha, has a totally different mentality from the other generations and is gradually changing Americans' consumption habits.
Being the first generation to grow up with the Internet and portable digital technology from a young age, Generation Z members are often referred to as "digital natives." The Economist has described Gen Z, most frequently being defined as people born from 1997 to 2012, as a more educated, well-behaved, stressed and depressed generation in comparison to previous generations.
Gen Z's spending power is on the rise. Currently, the United States is home to 65 million Gen Zers, making them the third largest generational cohort and comprising 20.7% of the U.S. population. As more and more Generation Z enter adulthood, they will occupy a larger proportion of the workforce. It is estimated that by 2030, Generation Z will occupy 30% of the job market and gradually become the main consumer force in the United States.
What are the characteristics of this generation? How will this affect American consumption habits?
1. Gen Z is actually the most frugal generation of Americans
Born in an era of slow economic growth, Gen Z does not spend as lavishly as the previous generation. According to Influencer Marketing, Gen Z typically allocates one-third of their income to savings.
Shopping at discount stores is one of their methods for cutting costs, with 48% of Gen Z preferring to shop at these locations. As consumers, members of Generation Z are also typically reliant on the Internet to research their options and to place orders. The hashtag #tiktokmademebuyit has been viewed more than 6.70 billion times. Affordable online beauty brands like $e.l.f. Beauty (ELF.US)$ are favored by the younger generation.
Gen Z still shops brick-and-mortar, though. In the past two years, Sam's Club has seen a more than 60% increase in membership among individuals 27 years old and younger. However, Gen Zers seem to love a good deal and tend to favor foods with lower per-unit costs compared to earlier generations. Bulk purchases from $Costco (COST.US)$ or Sam's Club, such as toilet paper or canned goods, are frequently shared among roommates, friends, or family members, making this approach particularly effective for non-perishable items.
2. Gen Z is immersed in social media.
Social media platforms are an important source of inspiration for young people to entertain, seek information, stay connected with friends, and shop. $Meta Platforms (META.US)$ 's Instagram Reels short videos are popular among young people for content creation.
At the same time, Generation Z's preference for information retrieval is shifting from traditional search engines such as Google to community-based internet platforms such as $Reddit (RDDT.US)$ . On Reddit, users are exposed to new and diverse topics through a constantly updating feed of posts from subreddits they subscribe to, along with suggested content from related communities. Text-based discussions and comments encourage more in-depth engagement with content, compared to traditional platforms that may prioritize quick browsing.
3. Gen Z loves streaming media
$Netflix (NFLX.US)$ and $Spotify Technology (SPOT.US)$ are favorites among the younger generation for binge-watching shows and listening to music, respectively, allowing for a highly personalized experience.
Additionally, as the younger generation watches traditional television less, this has created market opportunities for sports streaming services. Fox, Warner Bros. Discovery, and $Disney (DIS.US)$ -owned ESPN have announced plans to create a new "super platform" later this fall, which will consolidate their sports broadcasting rights under one "roof," thereby creating the strongest sports streaming service ever to attract young viewers who typically do not watch much television.
4. Gen Z who live alone have an increased desire for the emotional support that pets provide.
Many Gen Z individuals are willing to spend money generously on their pets. A survey completed in the United States has revealed, Gen Z pet owners spent the most on their pets, $1,885 annually, on average. While millennials are the group that spent the second most on their pets, they represented the biggest share of pet owners in the US (32%).
Gwi's report indicates that Gen Z's preferences for pets (+22% YoY) are one of the fastest-growing purchase drivers behind the brand of pet food they choose. As social media becomes a key influencer in purchasing decisions, partnerships with pet influencers are proving to be highly profitable for both brands and consumers. Regarding their preferred retailers, $Chewy (CHWY.US)$ is gaining popularity, showing an 18% increase year-over-year.
5. Gen Z prefers digital payment
A recent EY survey has shown that Gen Z is at the forefront of adopting digital payment methods among all age groups. They favor fast and simple payment experiences and show less concern for data privacy. Cash (owned by its parent company $Block (SQ.US)$ ), Apple Pay, and $PayPal (PYPL.US)$ are the most popular cashless payment methods among young people.
Besides, Gen Zers prefer debit cards to credit cards. Only 39% of Gen Z reported frequent use. Instead, they switched to BNPL (Buy Now Pay Later) services, such as those offered by the company $Affirm Holdings (AFRM.US)$ . Discovery's research shows that the usage rate of pay later in Gen Z is as high as 40%.
6. Sports betting has been widely accepted by Gen Z
As US regulations around gambling begin to loosen in certain states, sports betting is gaining popularity among Gen Z. For those aged 21-26, there has been a 16% increase in betting through mobile devices and a 14% rise in casino betting. Aggressive advertising plays a significant role in this trend.
Additionally, more Gen Zers are diversifying their sports interests, with significant increases in following leagues such as ONE Championship (+60% YoY), Formula 1 (+53% YoY), and WWE (+47% YoY). Interest in women's sports leagues has also seen a notable rise during this period, especially for events like the FIFA Women's World Cup (+26%). There has also been a 24% increase in Gen Z women following the NFL, contributing to the expanding user base of online betting platforms. $DraftKings (DKNG.US)$
In conclusion, Generation Z is reshaping the American consumer landscape with their unique behaviors and preferences. As digital natives, they are accustomed to leveraging technology in every aspect of their lives, from shopping and entertainment to financial transactions. Their frugality, combined with a preference for digital interactions and social media-driven consumption, highlights the shift in traditional consumer patterns, the generation's own socially conscious and tech-savvy inclinations.
Source: Discover Financial, EY, Gwi
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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