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Who are the consumers of tomorrow? What do they want? These are fundamental questions for investors who want to adjust their portfolios in line with the new consumption habits.
You always invest with an eye to the future. Anyone who has ever invested in things that turned out not to be future-proof has complained. From the railroad mania of the nineteenth century to the past glory of companies such as the photo specialist Kodak, the department store chain Sears or the toy chain Toys R Us, or the shooting stars of the dot-com bubble of the late nineties, or the non GamStop casinos that are popular among Z Generation in the UK. The consumer always has the last word.
Millennials, born between the early 1980s and 1996, are currently the most important generation in number and purchasing power terms. They are already a bit further in their careers. By 2050 they will be retired or at the end of their careers. Generation Z, born between 1997 and 2012, is leading the way in knowing where the consumption of goods and services is headed. That generation is now entering the labour market and will steadily gain purchasing power.
The transition from millennials to Generation Z will not be that difficult for companies. It will be all the more difficult to absorb the huge decline in spending from the baby boomers and the generation before millennials.
From Television to Gaming
For leisure activities, the interests of Generation Z are in line with the millennials. The difference with baby boomers is big. The latter watch a lot of television but shun video games. This is reversed in Generation Z. More than a quarter prefer video games. Watching television and movies are only 10 percent’s favourite digital leisure activities. These figures come from the fifteenth edition of Deloitte’s Digital Media Trends survey and only cover the United States, but everything indicates that the trends in the rest of the world are similar.
The sixteenth edition, conducted in the US, the UK, Germany, Brazil and Japan, shows that 96 to 98 percent of young people play games and spend an average of 11 to 12 hours a week on them.
Young people are more active on social media. According to a global study by WARC/GWI (formerly Global Web Index), young people spend nearly three hours a day on social media to follow the news, celebrities and influencers, play online games and shop that social media commerce is expected to increase fivefold to $3.370 billion by 2028, according to Grand View Research.
Music and video streaming are in second and third place in leisure activities. They spend an average of 118 and 90 minutes per day on this, respectively, according to WARC/GWI.
Paid streaming services such as Spotify, Apple Music, Netflix and Disney are popular but must meet certain requirements. According to Deloitte’s latest survey, the majority of American Gen Z members and millennials have cancelled a streaming service in the past six months. Nearly half subsequently resubscribed due to new content or promotions.
According to Deloitte, streaming platforms are also the stepping stone to the development of the metaverse – a kind of second digital environment. Various developments indicate this, such as the increasing trade via social media and the fact that many gamers state that they shape their personality with their avatar – a kind of digital image.
A maturing Generation Z will give companies headaches, especially in the field of marketing. Expensive TV campaigns don’t reach that generation. Sports sponsorship will not have much effect either. In the US, only one in four Gen Z’s watch live sports at least once a week, compared to one in two millennials.
Companies will mainly have to be present online and on social media, such as Instagram, Snapchat and TikTok. According to a study by The Influencer Marketing Factory, 97 percent of Gen Zers get their shopping inspiration there.
From New to Second-hand
In addition, generation Z pays a lot of attention to company values, of which equality and environmental awareness are the most important. This is evident from their interest in second-hand goods.
According to eBay’s e-commerce report, 80 percent have already purchased a used product which is much more than other generations.
From Classic Banks to FinTech
Generation Z also tends more towards digital solutions in the financial field. For example, they don’t pay cash, but with a smartphone. According to a global survey by the fintech company Thunes, led by Belgian Peter De Caluwe, 62 percent of 16 to 24-year-olds do not have a traditional bank account.
More than half of American Gen Z people invest, mainly through platforms such as the American online stockbroker Robinhood. This is less the case in Europe, but there is a demand for it. According to a survey by online brokerage firm Bux and Kantar, a third of French 18-24-year-olds want to learn more about investing to get started.
In their investments, they mainly follow the advice of influencers on social media. They invest in cryptocurrencies and individual stocks, with serious consequences for stock prices, such as the so-called meme coins, whose price skyrockets purely on social media posts.
From China to India
Geographically, an important generational shift is also underway. In China, Generation Z is much smaller than the generation that is now approaching retirement age. This demographic drag will weigh on the development potential of the world’s second-largest economy.
The new development pole of the global middle class should become India, where 20 percent of the world’s Gen Zs currently live. In addition to the young population (average age 28.4 years), the country can also count on new technology. Although there are still challenges, the Indian economy is growing at an average of 6 to 7 percent per year. The Mumbai stock exchange is one of the best performing. The Indian Nifty 50 index even rose in 2022.
