Mind the Gap: Now versus next: How Gen Z is challenging consumer sector norms (2024)

first up

Welcome back! This week, we’re talking about how Gen Z is challenging consumer norms.

The consumer landscape is shifting—big time—and Gen Z is playing its part in shaping the industry’s future.

State of the Consumer 2024, a new report from McKinsey senior partner Sajal Kohli and coauthors, finds that Gen Z consumers around the world are shopping in ways that challenge the status quo. Among the nine trends that the authors identify as defining the global consumer market, Gen Z plays a central role in shaping the following:

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A taste for the finer things. By 2030, 75 percent of consumers in emerging markets will be between the ages of 15 and 34. These consumers are optimistic about their respective economies—and are willing to spend. Consumers in Asia and the Middle East are interested in premium products, and they are twice as likely as young consumers in advanced economies to trade up (that is, opt for higher-priced brands and retailers).

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Value upstages values. Over the past several years, young consumers in advanced markets said they prioritized sustainability considerations when making purchases and backed up those feelings with their purchasing behavior. Even though many Gen Zers still care about sustainability, they’re making difficult trade-offs between their values and value. In the United States, as well as in some European countries such as France, Germany, and Spain, fewer Gen Zers ranked sustainability claims as an important purchasing factor in 2024 compared with 2023. The same is happening in Sweden and, to a lesser extent, in Japan and Australia. These young shoppers are also less willing to pay a premium for sustainable products.

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Getting personal. Gen Z women in both emerging and advanced markets said they expect to spend more on personal-care goods and services compared with Gen Xers and baby boomers. Personal-care products (which include vitamins and supplements) and services are an area for which Gen Z women worldwide said they expect to spend more.

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Like, comment, add to cart. China has led the world in the adoption of social commerce—that is, when consumers browse and buy directly through social media platforms. Young people in countries such as Brazil, India, Saudi Arabia, and the United Arab Emirates are accelerating the adoption of social commerce globally. And in the United States, our consumer analysis indicates the social-commerce market could grow to $145 billion by 2027, up from $67 billion today. According to our survey, Gen Zers make purchases on social media four times more often than older consumers do.

What should retailers and consumer goods companies make of these data points? For one thing, just because Gen Zers in Europe and the United States shop a certain way doesn’t mean that their behavior is mirrored in other parts of the world. For another, across the globe, wellness will continue to be a high-growth category, especially among Gen Zers and millennials. And finally, given that Gen Zers like premium products (don’t we all?), improving the impact of companies’ loyalty programs and instituting smarter pricing strategies are two ways to help bring these shoppers into the fold of a brand (even if they can’t afford top-tier products today) and keep them there as they age.

Where are the receipts? Gen Z consumers (and, FWIW, older consumers, too) have been defying expectations—like splurging when previous data indicated they would save—for several years. Retailers and consumer goods makers can no longer rely on Gen Z consumers to divert to historical shopping behavior. As a result, these companies should continually evolve in all corners of the business—from the products they make to their marketing and sales channels—to most effectively engage with consumers.

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Mind the Gap: Now versus next: How Gen Z is challenging consumer sector norms (2024)

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