Gen Z's spending power has come of age

young man millennial taking selfie
Generation Z has more spending power than retailers think. (DGLimages/iStock/Getty Images Plus/Getty Images)

Generation Z is quickly changing its role from influencer to purchaser as the generation comes of age. These consumers include some that are now graduating and entering the workforce and have their own buying power, while the younger ones are influencing how their parents spend money. Therefore, this is the time for retailers to learn how to market to and capture this generation's wallets. 

Marcie Merriman, executive director for growth strategy and retail Innovation at EY, says that this is the largest and most diverse generation yet and they differentiate from other generations in the way that they were raised. These consumers grew up during the Great Recession and in the era of "fake news," which makes them skeptical and looking for complete transparency from brands. Merriman adds that members of Gen Z are also digitally native and are skilled at comparison shopping online for the best prices.

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"Currently, Gen Z holds up to $143 billion in direct buying power, with the potential to impact more than $665 billion in family spending—and they have only just gotten started!," Merriman told FierceRetail. "While some of their influence is on adults around them they should still be top of mind to retailers right now as their power is only getting stronger—representing over 40% of consumers by 2020 (FutureCast)."

As their shopping power increases, retailers will need to be more transparent when it comes to the quality of products, how materials are sourced, and how employees are treated, says Merriman. So how should retailers be preparing for the maturity of this buying group?

"Engaging Gen Z is all about getting the basics right and offering streamlined transactions. Many retailers are focused on strategies to surprise and delight customers or building outrageous experiences, while failing to meet consumer’s basic needs. If the day-to-day processes aren’t right, they will lose Gen Z customers no matter how grand the offering," she said. "Having an easy, intuitive and seamless end-to-end experience in store and online is the first step to engaging Gen Z."

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The challenge for retailers will be shifting employees from menial to meaningful work, as Gen Z expects that employees can offer product expertise and connect with consumers on a deeper level.

"Grasping Gen Z’s shopping habits starts with understanding the generation as a whole. Think about their experience. Gen Z has never known a world without radical connectivity, terrorism or a black president. They are ambitious realists, skeptical and driven to find their own answers. Being authentic, transparent and creating an intuitive shopping experience will go a long way with them," Merriman said.