Brace yourself for this one: Millennials are old news. Global consumer-facing sectors have long focused on the habits of the Millennial shopper. Yet as a new decade emerges, so does a revolution of consumers.
Enter Generation Z. This generational shift is approaching rapidly – before we know it, Gen Z will be the forefront of consumerism. This new crop of users is leading an evolution of shopping that will transform the way we think about payments and retail, specifically among ecommerce platforms like Shopify.
2019 was the first year that Gen Z overtook Millennials as the most significant percentage of the global population. For further conviction of their control – their buying power in the US is $143b, and they will be ⅓ of global consumers by the end of this next decade. This new generation is propelling ahead at full speed and bringing with them an entirely new wave of consumerism.
This new decade will see a revolution of ecommerce trends stemming from the minds and habits of Gen Z-ers who look at money differently and are wary of the broken credit system. The way they shop, communicate, pay, and spend are offbeat to Millennial habits. As Gen Z becomes increasingly influential, businesses must master the new generation’s payment habits and trends before it becomes a game of catch-up.
Gen Z/ Millennials are shopping differently and using new payment technologies.
Combine an increasing lack of trust for banks and the exponential rise of technological advancement, and you have an evolution of payments on your hands. Even with Millennials urging shopping malls into obscurity, Gen Z still appreciates the experience of in-store retail.
However, when they step foot into a mall, it’s not a wad of cash in their back pocket – it’s a 50 GB iPhone. Who needs a wallet when you have Apple pay, Venmo, Cashapp, Zelle… to name a few. Digital payments are in; cash is out. This new generation can go days, weeks, months even – without touching a dollar bill. The accessibility of digital payments is something this cohort has taken with stride as their new normal.
Despite their youth, Gen Z is already using peer-to-peer (P2P) payments (payments that allow users to send one another money from their mobile devices through a linked bank account or card) more than Millennials and Gen-Xers, with 79% reporting use at least once per month.
Even with Gen Z on the move to restimulate in-store shopping, there is one major dilemma: a global pandemic. Ecommerce is booming, Amazon hired hundreds of thousands of new employees, and supply chains are wreaking havoc on retail. Sezzle found it appropriate to explore the thoughts of generations towards malls amid this chaos. Admittedly and gratefully, our business model has exploded by benefitting from this boom in ecommerce. As many Shopify and ecommerce retailers have seen, COVID-19 has provided a huge boom in online retail.
Yet, we are well on our way to expanding our in-store financing option – making the current stagnancy of in-store retail a pertinent focus. To explore insights on this topic, we developed user surveys to examine the minds of more than 3,000 Sezzle users across all generations, income levels, genders, and demographics, hoping to understand the feelings our shoppers have towards returning to the mall, and it’s no surprise to learn that Gen Z is ready to hit the ground running.
76% of these shoppers reported feeling comfortable hitting the mall either now or within the next six months, compared to only 56% of Boomers and 70% of Millennials. With this data, we discovered that the stores that make it through this dry spell would more than likely spring back quickly. Younger shoppers are looking to get out of the house and take a trip – even if that trip is only to the local shopping mall. On the other hand, older generations are judiciously going to steer clear from in-store shopping for the time being.
With Gen Z heading back to malls sooner than some expected, we found it best to understand where precisely these shopping patterns would take them. Sezzle user research showed a shift away from globalization, towards the localization of retail; not because of slightly higher unrest among consumers and purchasing abroad, but due mainly to the influx of support to help save local businesses that have been hit hard in the post-pandemic economy.
The support of local companies translates smoothly into the flood of support towards Black and minority-owned businesses, of which Gen Z has been a considerable driver in supporting. Sezzle surveys found that over 60% of Gen Z plans on shopping more locally post-COVID.
So… what does this mean for retailers?
It means you’ve got to gear up because these young shoppers are coming soon to a store near you. To spear the interest of and target these dynamic consumers, retailers must prepare for an evolution in shopping – beginning with payments.
To best market your store to younger generations, you need to meet them on their terms (aka payments).
The burning question, of course, is how? How can we best target this generation? How should we position ourselves to provide Gen Z with a user experience completely tailored to their affinities? As discussed, this generation needs differentiation. Retailers are not going to catch Gen Z with the same net that they have been using to fish for Millennials.
Sezzle firmly believes that how this generation grew up diverged them from previous cohorts- the combination of digital autochthony and economic turmoil was the recipe for the unique and practical mind of the Gen Z consumer.
However, these generations do agree on one thing: the downslide of credit. Both have the lowest average credit card balance of all current ages, according to Experian’s 7th Annual State of Credit. Additionally, over half of Gen Z has non-prime credit scores, making it difficult to obtain a credit card or take out a loan in the first place. These reasons constructed the forefront of why this era of consumers is finding alternative ways to pay.
A shift in the evolution of payments is coming. The key to targeting these new consumers will be to evolve alongside them. Venmo introduced users to a platform they didn’t yet know they needed – a combination of personal finance and social media. This app was adopted by Gen Z more heavily than any other generation, and that’s because it’s letting them keep track of finances and keep up with friends. The fact that Venmo makes splitting a dinner bill exponentially easier only makes it that much better.
These apps are doing so well because they disrupt the payment business and introduce the experience of payments. Payment platforms are no longer just the means to an end of the checkout process; they are connections. They connect retailers to consumers on a level that payment platforms never have before.
Rather than just paying with a credit card, these younger consumers are creating a relationship with payments – they are immersing themselves in the experience. Whether it be a social connection, a financial knowledge aspect, or an emotional attachment, payments have become the retail space’s nucleus. This generation wants to connect to their payments in a whole new way.
The solution here will be the flexibility to accommodate this younger demographic, especially on ecommerce platforms. Whether these consumers want to be using Apple Pay, Venmo, Sezzle, or another big name in the alternative payments industry – retailers are going to need options; it’s no longer a question of if, only when.
Buy Now, Pay Later options are a solution to this problem among the younger generation because it bridges the gap between the desire to stretch payments out and the straying from credit. A recent study from Javelin Strategies found that 51% of Gen Z members do not plan to apply for a credit card. Yet without credit, there is still the challenge of making payments over time when you find yourself strapped for cash.
This research is why companies like Sezzle have created a solution, a safer way to put buying power back into the hands of a generation that fears credit card debt more than death. We noticed this gap in the market and bridged it by creating a digital payment solution that gives shoppers the ability to make payments over six weeks without any interest or fees.
We met our shoppers on their terms, with a solution they weren’t even aware was possible. As our solution has grown, so has the demand from younger consumers on digital payment solutions of all kinds. These consumers want payments to be more than just a means to an end in purchasing. Like everything else in their lives, they agree payments must build a connection.
Sezzle serves thousands of Shopify retailers to build this connection with consumers, increase conversions, and tap into a rapidly growing retail trend. The right payment solution can have a dramatic impact on merchants’ sales and customer lifetime value. Now more than ever, it’s important that retailers align themselves with payment options that fit with their values and customer experience standards.
After years of playing catch-up in trying to understand Millennial’s minds and habits, it’s officially time to call it quits. Going forward, we need to be one step ahead. Retailers should be actively comprehending the desires of Gen Z (and future generations) before time flies by and they’re left in the dust.
Generation Z is a cohort of consumers who desire change and have a shared determination to save the economy and environment – they are also the future of our economy. This uprising is why retailers and the consumer-facing sector have to come to them – not only meet this generation on their terms but expect what those terms could be instead of being told. The evolution of payments is only the beginning.
Sezzle was founded with the mission in mind to empower consumers financially. We saw the decline in credit card usage and massive distrust towards credit card companies paralleled with the need for interest-free financing options. This gap in the market created the perfect opportunity for Sezzle to afford consumers the ability to finance their purchases healthily while teaching them critical financial knowledge tools.
Our product is one that serves the need these future generations are looking for – it creates a relationship among payments and retail and services more than just a means to an end in shopping. With future product advancements, Sezzle will not only give consumers the ability to pay interest-free over time but also applaud positive payment behavior through credit building. In accompaniment, Sezzle will offer users the chance to use and learn from top-tier financial influencers through a new program called “SezzleU.”
The business model of Sezzle is to keep moving, iterating, (and reiterating), to provide the best possible product to our consumers. We don’t wait to see the trends and habits of Gen Z and their younger counterparts as they come, we anticipate them and grow our product alongside those anticipations. The world of payments is no longer a simple “cash or credit” question; it is an entire economy. For retailers to understand and accommodate the minds of younger consumers, they will need to board the evolution of payments.
The next generation is ready to Sezzle. Are you?
Allow your shoppers to split their payments into interest-free installments by adding Sezzle to your checkout today. Sezzle provides an instant approval and direct integration to thousands of Shopify stores.
You can sign up, get approved, and integrate with Sezzle all in less than a day and be on your way to larger basket sizes and higher conversions Utilizing leaders in the ecommerce space like Sezzle and Diff takes your online business one step ahead of the game.
This article originally appeared in the Diff Agency blog and has been published here with permission.