Retail is evolving at a rapid pace. Here's how Gen Z is shaping the future of shopping and what you can do about it.

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Ever wondered how we'll be shopping one year from now? What about in ten? Or which trends your retail business should focus on to stay relevant?
Look no further than Generation Z ― digital natives who are reshaping the future of shopping as we know it today.

This generation is acutely aware of the impact they and their brands have on the world.

Gen Z aren't afraid to use this knowledge when choosing where and how to shop.

Meet Gen Z ― the next consumer generation

Born between the late 1990s and mid-2010s, Gen Z is a consumer force to be reckoned with. Making up over 25% of the US population as of 2020, and expected to represent more than 60% of Global Personal Luxury Market by 2025, Gen Z's estimated spending power has been estimated in the region of €235 to 265 billion, according to Altagamma and the Boston Consulting Group. Add that to their parent's spending power ― many Gen Z'ers are under 18 ― and estimates total more than $600 billion (data from Campaign Monitor).

As Gen Z continues to enter the employment market ― currently, the oldest members of Gen Z are approximate 24, while the youngest are around 7 ― this will rise.

60%

of Gen Z want to make a positive difference in the world and part of that is responsible retail. (According to Martketo)

However, it's not just Gen Z's buying power alone that is set to influence the commercial sector, it's precisely how Gen Z will use their consumer power that matters.

Luxury brands should take note too.
As 60% of the future market, Gen Z could be make-it-or-break-it consumers for high-end brands. Connecting with this younger generation of consumers could be vital, and the way to do so is in their language — digital engagement, creation and trendsetting.

Gen Z vs. Millennials, Gen Xers, and Boomers ― What's changed?

It’s true ― Gen Z have their unique way of doing things. But how is this different from previous generations and why should we be expecting big changes? Let’s take a look.

Blurred lines

Gen Z are conscientious consumers. How they view themselves bleeds into every aspect of their life from the entertainment they choose, future professions, and even shopping decisions.

Compared to previous generations ― Boomers and Gen X’ers ― there is no longer a professional life, personal life divide, only authenticity. In terms of shopping, this means Gen Z are only choosing brands that align with their beliefs and image.

Creative-first approach

Just as authenticity is key, so too is individuality. Gen Z shoppers are increasingly choosing brands that not only represent their uniqueness but embrace it. Raised on social media, Gen Z craves that authentic connection with a brand, a sense of community. And this is transforming how brands need to connect with their consumers. If in previous generations, this was a one-sided dialogue ― advertising → consumer ― now, it's a conversation.

F.O.M.O.

Gen Z consumers can feel overwhelmed by the fear of missing out (aka FOMO). Compared to Millennials who sought out the Instagrammable experience, Gen Z's digital natives go future. Focused on combining video and action, they are natural multi-taskers, and this applies even when it comes to their screens. If we compare this to previous generations, this FOMO experience wasn't as intense, as Boomers and Gen X'ers were easily able to "switch off" and walk away. For brands, it's important to stay relevant and connected to the in-the-moment aspect of shopping.

Hard-earned loyalty

Gen Z is a first-impressions-matter consumer. According to Sitecore, 57% of Gen Z'ers are willing to move to another retailer after just one poor shopping experience. Less loyal than previous generations, they expect their patronage as consumers to be valued. Fail to deliver and face "cancellation."

Innovative by nature

Gen Z'ers actively seek out that innovative experience. Compared even to a generation ago, they are more open to trying new brands ― 55% for Gen Z versus 46% for Millennials ― and favor the transformation to digital, with 76% in favor of digital services/products for brands (Salesforce). To rise to the demands of the new market, brands must strive to deliver new, innovative experiences for their customers by digitalizing products and services.

55%

Of Gen Z are more open to trying new brands

76%

Of Gen Z favor of digital services/products for brands

Experiences matter

Although Gen Z prefer online shopping, they still believe experiences matter. In fact, according to Sitecore, 83% view shopping as an experience rather than
a transaction. That means Gen Z specifically seeks out brands that cater to their desire to be unique, provide an experience not just a service, and are interactive with their customers. For retailers, this means adapting to a whole new breed of consumer seeking a brand to suit their lifestyle in a way like never before.

Known for "cancel culture," Gen Z demand more from the brands they use, wanting them to be both valuable and ethical. Add that to more choice than ever due to online shopping, and we see that just 16% of Gen Z'ers state that they shop at a single store, compared to 26% among older Millennials ( Accenture ). For retailers, this is prime time to catch the eyes of new consumers and convert them to your brand.

63%

Of Gen Z consumers can't stand slow or not functioning websites

37%

Would completely abandon a purchase completely or leave a negative review

57%

Find themselves trying new brands, decreasing any previous brand loyalty.

COVID-19 and Gen Z ― kicking digital trends into hyperdrive

Just as Gen Z were starting to realize themselves as a consumer superpower, the 2020 coronavirus pandemic came along and kicked Gen Z-based trends into hyperdrive. Social distancing meant more consumers were heading online, and the demand to adapt to a new way
of shopping grew. Here's what we learned (Sitescore) :

Luckily, at the same time, 87% state that during the coronavirus crisis, their digital shopping experiences have improved, giving hope to retail providers that they are doing something right.

55%

Of Gen Z are more open to trying new brands

55%

Of Gen Z are more open to trying new brands

What does all this mean for your retail business?

In the new digital era, it's clear that those who fail to keep up with the times will fall behind. The rule is adapt quickly and thrive. So what can retailers do to stay ahead? Here’s what our research says:

Gen Z’ers see shopping as an experience, not just a purchase.
They don't want a boring 2D online shopping process that leaves them guessing whether or not a product is right for them. They want interactivity, creativity, communication, clarity and fun. That's where 3D experiences come into play.

Research by Gartner shows that 30% of Gen Z shoppers stated that augmented reality (AR) experiences would improve their shopping experience, and perhaps this is why brands are quick to on-board the technology.

One vibrant example of this is our collaboration with high-end fashion brand Gucci that helped solidify its position as the No.1 luxury brand among Gen Z and millennials in 2020. By adding proprietary try-on technology, Gucci capitalized of the "for-the-gram" demand for the young audience.

While working with WANNA, Gucci’s end goal was attracting new customers, engaging dormant users, and increase product activation via AR.

Add interactive
AR experiences

3x

Increase in the number of users

5x

Increase in average session time

25%

Increase for 1 photo conversion when a user tries on 10.9 shoes.

The results?

Digital natives became able to try-on virtual shoes that gave them that luxury style and exclusivity. In turn, this formed an exclusive shopping experience that helped transform browsers into buyers.

However, Gucci is not alone in embracing our AR technology. Sustainable shoes and clothing company, Allbirds is also a fan. When the brand added try-on tech to their repertoire, Senior Product Manager, Chris Peters, stated that "customers love the ability to try on shoes at home" and leave 5-star reviews as a sign of confidence.

Our recently released SDK is empowering more brands than ever before to add AR to their shopping experience. One brand that took up the challenge was IWC watches, a company with a distinct plan to integrate and improve the customer experience. IWC, focusing on Gen Z, sought to access the growing market of young investor of luxury watches. Adding WANNA SDK, they created a digital-friendly experience that brought watch tech into the AR world.

Adopt a personalized
approach

The modern consumer doesn't want to feel like they are a number. They want to feel that their purchase matters and it is unique to them. But what does exclusivity mean to Gen Z?

Adding personalization is no longer a nice-to-have, it's a must. To get that personalized luxury experience, brands are having to work harder than ever before to adapt to the move from the dressing room to the online basket.

For some, it may mean delivering AI-based experiences that offer product recommendations such as Amazon's powerful, "You might also like…" AI tool. For others, it means the ability to customize a product digitally, tailoring it to a particular customer.

Japanese men's fashion brand Kashiyama discovered this for themselves when they onboarded technology by Threekit. Their online store allowed users to tweak the suits they offer, creating a digital shopping experience that feels like stepping into a tailor's, giving that element of luxury.

But it's not just about the front-end experience. Such technology also empowers companies to understand customer preferences more clearly and develop their product lines based on demand.

In addition, early studies suggest that the 3D digital asset experience delivers a powerful purchase incentive as consumers feel a deeper connection to the product.

Gamification is mainstream

Forget about that teenage gamer stereotype. Now, gamification is a key and growing strategy across all retail areas. The element of play helps consumers become involved with the brand, it's an entirely new platform for interaction. Games such as Animal Crossing, Pokémon Go and Sims serve as proof to just how widespread gamification is.

Source: dezeen.com

This interactive experience highlights that Gen Zers don't just see luxury as something expensive. Instead, luxury is innovative, unique, and a genuine experience.

Create virtual goods as standalone commodities

Just like cryptocurrencies revolutionized the financial world, digital ownership of commodities is growing. This drive to own digital assets can be linked to the "digital lipstick effect," an upgrade on the low-tech "lipstick effect," where consumers spend on small luxury items even during economic downturns, like a luxury lipstick instead of a designer coat.

Take, for example, Gucci's "The Virtual 25". These are luxury sneakers released by Gucci that consumers can try-on and buy. But what makes "The Virtual 25" different? These exclusive sneakers are ONLY available as digital assets. They can be worn in virtual worlds, VRChats, and online games (Roblox), but the buyer doesn't receive a physical pair of trainers in the real world.

Virtual sneakers represent a new wave in digital assets. An in-vogue item that invites new consumers to discover the brand, with the intention that one day they will become purchasers of much more expensive items. The allure of exclusivity is what makes "The Virtual 25" so effective, and this is something that retail brands need to pay attention to in the future.

But what do games have to do with retail? By adopting the mechanics behind gaming, retail brands can engage consumers in a whole new way. Even luxury fashion brands are getting in on the action—literally. For example, Balenciaga's Spring 2021 Fashion Show created an immersive experience, in their first-person-player game "Afterworld: The Age of Tomorrow." In it, the player is taken on an adventure to 2031 and observes the world of fashion.

AR for instore

AR isn't only for online purchases; it's heading instore too. Gartner's 2020 Consumer Pandemic Attitudes and Behaviors Survey indicated that 50%+ of consumers actually miss shopping instore. While the pandemic making in-store shopping more complicated and delivered a boost to digital, it doesn't mean that in-store is dead. No! It's evolving.

Now, before heading instore, consumers can try on products at home so that when they visit the brick and mortar building, they know what they are looking for. In addition, companies can install AR-powered services instore to facilitate try-on and help the customer see how the product really looks.

For example, Burberry introduced an AR in-store experience in Harrods to launch its new Olympia bag. Via an in-store QR code, customers could watch the Elphis statue walk around the store, take selfies and share with their friends in what Burberry described as "latest in a series of activations exploring the relationship between physical and digital experiences to create exciting new concepts for our community and enhance the luxury experience."

Source: burberryplc.com

But this isn't just about looks. This technology can be harnessed to deliver more accurate analytics to companies, such as try-on diagnostics, information about a consumers likes and dislikes, and which products consumers are trying more off. By analyzing the gaps and trends, brands can better understand their customers and deliver more tailored services.

The future of shopping is now!

As we move into the post-COVID-19 world, it's clear that the future of shopping isn't some mythical date in the future ― it's now! Even at this moment, brands need to be adopting forward-thinking solutions that align with industry trends and embrace the next generation of consumers.

By 2031, we'll be observing a value-centered industry where the brands that thrived were the ones that connected with their customers today.

With 2.56 billion Gen Zers globally soon to hit the market with full force, it is one that can't be ignored or dampened. Instead, brands need to be onboarding new tech solutions, such as AR, that innovate the current digital shopping experience and make it more enjoyable, engaging, and profitable for both consumers and businesses alike.