One expert said that if you want to make a long-term bet on Gen Z shoppers, you should invest in Lululemon, Nike, or TJ Maxx.
Maggie Komes, who is 23 years old, uses social media to shop and talk about the latest fashions.
Her TikTok page shows her recent “hauls” or outfit purchases from stores like Abercrombie & Fitch, Amazon, Gap, and Target.
“I’m easily swayed by other people’s videos, and it makes me feel better about the things I buy,” Komes, who works in social media marketing, told Yahoo Finance.
Komes is part of the age group that stores want to reach. Gen Z, which includes most people born after 1997, has become a powerful group with more than $360 billion in buying power by 2021, according to Bloomberg.
Hitha Herzog, the head of retail research at H Squared Research, told Yahoo Finance, “They are the ones who set cultural touchstones.” “They are the ones who talk about and share trends, and they are the ones who make a buzz, so it’s almost like built-in marketing. Once you get the attention of the younger group, you’ll have a wave of business.
For younger shoppers, social media is a big part of how they find out about new products. And once something becomes popular, young people are more likely to buy it.
In a recent poll of 880 Americans by Charles Schwab, 55% of Gen Z said they bought things based on what their friends and other influential people shared on social media. Social media also had an effect on the buying of 46% of millennials, 27% of Gen Xers, and 10% of baby boomers.
But young people who just got their first jobs have less money to spend.
A poll of 1,000 people by GoBankingRates found that 61% of young adults ages 18 to 24 have less than $1,000 in savings, and 31% have less than $100.
So how do they have money to spend? Herzog says that it varies.
She said, “There are a lot of reasons, but a lot of this generation is probably still living at home or in places where they don’t have a lot of costs to cover.” “A lot of that extra money is being spent on buying things.”
Getting young shoppers is “an opportunity that never goes away.”
Retailers hope that this age group will bring in more customers.
On a recent call with investors, Peter E. Nordstrom, the president of Nordstrom (JWN), said that younger customers are “a bit of an evergreen opportunity.”
Nordstrom said, “We need to do better with younger customers, and we have plans to do that.” “I think a big part of that will be our label programmes. I wish we could just flip a switch and fix that right away.”
Abercrombie & Fitch (ANF) is all about making a customer stay with them. The store that used to be known for its loud music, “fierce”-smelling cologne, and models at the front is now geared towards people in their 20s.
The CEO of Abercrombie & Fitch, Fran Horowitz, told Yahoo Finance, “When we market to and design for a consumer, that consumer is a young millennial in their mid-to late-20s.” “They might start shopping with us when they are in their 20s. They are still here when they are in their 30s and 40s.
Kohl’s (KSS) is also trying to get younger people to shop there. CEO Tom Kingsbury told investors that adding Sephora inside stores is good for business because young people are going there in droves.
“The Sephora business has been incredibly good,” Kingsbury said, adding that places with a Sephora made more money. “This is pretty amazing… It also brings in people of different ages and backgrounds. But it’s been a big help, and we’re making good progress.”
Kohl’s has been struggling for a few years, so now they are trying to get customers who come in for Charlotte Tilbury or Rare Beauty makeup to buy more things. Kingsbury also said that the store sees a chance to grow its business with young women, as well as with home decor and gifts.
Even Forever 21, which used to be a mall favourite for kids and teens, joined forces with e-commerce giant Shein, which is known for its low prices that attract young shoppers.
How can buyers profit from it?
Adrienne Yih, a consumer discretionary analyst at Barclays, talked about the retail stocks she is keeping a close eye on over the next six months and beyond to play this theme.
Want to join a company that is getting a lot of attention on social media for its new ideas and products? Yih said to check out Lululemon (LULU) or Nike (NKE).
Abbie Zvejnieks, an analyst at Piper Sandler, told Yahoo Finance on Friday that Lululemon is bringing “comfortable, innovative newness” to the market, and that’s what they’re selling to younger people. “That’s why I think they’re in a good spot for the back-to-school season. We see a lot of TikTok stars being used in social media marketing.
Barclays thinks that off-price stores like TJ Maxx (TJX) and Ross Stores (ROST) are the way to go for brands that want to make their money go further with Gen Z or make their wallets feel less tight.
Think about Dick’s Sporting Goods (DKS), Lululemon, Ulta (ULTA), or Nike if you want to invest in businesses that take advantage of secular lifestyle trends like health and wellness, activewear, and beauty.
Yet, Herzog says that stores of all kinds are making an effort to connect with younger customers.
“That’s the group everyone wants to be a part of,” Herzog said. “It doesn’t matter if you sell power tools or if you sell makeup… That’s the generation.”