What’s known as Gen Z makes up a third of the world’s population. This first indicator immediately presents us what could be described as tangible evidence: the spending habits of the generation born between 1997 and 2012, the generation that turns 21 this year, are particularly significant. Gen Z boasts an annual buying power equal to 100 billion dollars and by 2025 it will represent 27% of the global workforce, having a significant impact on the world economy. So, on what and how do young people spend? What are the values that underpin their choices? Framing and analysing the particularities and the development of trends is important for understanding the trajectories of consumption and putting appropriate strategies in place.
The BCW strategic consultancy firm has attempted to respond to this with a study, published this year, taking in a sample group of 36,000 people from 40 different countries, Italy included. The report suggests that in an uncertain economic climate, the climate crisis, and ongoing wars, Gen Z gives great priority to social connections: 57% stressed the importance of loyalty in friendships, while 56% strongly believed that we should all be treated equally and given the same opportunities. These data are confirmed by the top three values that guide the younger generations: benevolence, universalism and security.
Furthermore, among the stand-outs is Gen Z’s desire for power, achievement, hedonism and stimulation. As Taylor Saia, Strategy and Planning Director of BCW’s British arm, explains: “Younger generations have grown up in highly digitised societies in which peers’ achievements are broadcast on social media, affording a window into the highlights of other people’s lives. As a result, it’s no wonder that younger generations focus so much on realising - and being seen to be realising - their highest potential”.
Another piece of research, carried out in 2023 by the British agency Deloitte on a sample group of more than 14,000 people belonging to Gen Z and over 8,000 Millennials from 44 different countries, threw up a major concern over environmental impact, amongst other things: the climate crisis is a particularly sensitive issue and impacts consumer choices. The study showed that 59% of the Gen Z interviewees and 60% of the Millennials stated that they were willing to pay more for more sustainable products and services; equally, more than half of the Gen Z and Millennial interviewees flagged up the difficulties of putting this choice into practice because of the economic situation.
When it comes to consumption, the subject of the home inevitably comes to the fore. One interesting piece of information emerged from research carried out by the American platform LendingTree, reported in the New York Times, according to which the upcoming American generations are keen to purchase real estate. This emerged from a study carried out in 2022 that took in 50 of the largest metropolitan areas in America and estimated mortgage applications made by users of all ages: it emerged that 15% of potential buyers are members of Gen Z.
Moving on to the Chinese economy, observers and economists report criticalities that are largely due to a real estate market currently experiencing crisis, low levels of domestic consumption and dwindling exports. Basically, a slowdown that to some extent gives the lie to hopes that China has returned to pre-Covid growth rates. A slowdown that has raised concern, given the dual link between the global economy and the Chinese economy, whose relationships are interwoven, especially when it comes to the Western countries. One interesting finding is that the level of unemployment among 16 to 24-year-olds in urban areas, which has reached 21.3%.
Francesco Boggio Ferraris, an expert in international trade relations and Director of the Academy of Italy China Council Foundation, had this to say: “Where the Chinese economy is concerned, we expect and are confident that there will be a uptick in confidence between late 2023 and the first half of 2024, as regards the consumption of goods pertaining to the sphere of personal fulfilment. In this scenario we are seeing a more careful, mature, aware and sceptical consumer in relation to communications that might be described as simplistic and calculating, in which the communication schemes are repeated on a cyclical basis.”
The data for the first six months of 2023 provide a snapshot of a market split two ways between Gen Z and more adult consumers. “These two generational cohorts are increasingly concerned about product quality, thanks to the knock-on effects of supply chain ESG. We have observed this macrotrend at global level, the only difference being that Chinese consumers are less attentive to the issue of governance. On the other hand, sustainability is an essential value, especially when it comes to the home: younger people furnish their homes with sustainable design products,” continued Ferraris.
When it comes to habits, 40% of Gen Z inhabitants residing in first-tier cities such as Beijing, Shanghai, Shenzhen and Hangzhou manage to spend all their earnings before the end of the month, just before or shortly after being paid. “In this segment of the population, there is no predisposition towards the typically Chinese habit of saving. The pandemic led to what’s known as revenge spending, a genuine frenzy that induces younger members of the population to want to acquire mid-range and high-end products. This is good news for firms operating in the design and furniture segment in particular,” Ferraris went on.
The choices of the new Chinese consumers are driven by three values: emotionality, authenticity and exclusivity. The influences on purchasing decisions come from word of mouth, but especially from KOLs and KOCs, key opinion leaders and key opinion consumers, respectively. The latter are seen as more reliable because they are not paid by companies for their reviews. “Qíngxùhuà, i.e. emotionality, is a Chinese word that frequently crops on social media and refers to those products capable of triggering emotions, something that was heavily suppressed during lockdown. Lockdown, which we remember as having been extremely tough. This also explains why a major shift has been observed in the world of work: a huge desire to work outside the home is being evidenced. The furnishing in Chinese offices these days, especially in the great giants, is becoming increasingly similar to that found in homes, creating a familiar, comfortable ambience. Moreover, the 996 model, i.e. the model based on working from 9 in the morning till 9 in the evening, 6 days out of 7, is falling out of favour, especially among the younger generations of the technological world,” Ferraris added.
The speed with which consumer transformation takes place is visible. Attitudes change and new habits impact the world of commerce. All this in a scenario in which economic and geopolitics are increasingly interwoven, in which companies are called upon to question themselves punctually: what strategies should be implemented? How to communicate their own identities? And especially: what is the vision and what are the values?