Retailers have been obsessed with millennials.
But now, they're scrambling to understand Generation Z, the teen generation. After all, teens are the future of retail.
"From a spending perspective [teens] are millennials on steroids," Marcie Merriman, executive director of growth strategy and retail innovation at Ernst & Young, told Business Insider.
A recent study by Ernst & Young sought to find out how the two groups of young people differ. The firm polled 1,000 adults and 400 teens.
It's important for companies to recognize the differences between the two generations, and how failing to do so could harm them.
Here are some crucial facts:
Teens are even more frugal than millennials, but in a different way.
Gen Z captures millennials' behavioral traits ... and then expands upon them.
"The things you see millennials doing when it comes to spending, Gen Z are just taking it to another level," Merriman said. "Millennials have been in the position of being frugal and very careful with their money."
Gen Z isn't just frugal — they're out to find the best value, Merriman said: "They look beyond just what the price says it is to what you're going to get for it [the price] — are you going to get free delivery? What other services come along with it?"
Gen Z doesn't shop online nearly as much as millennials.
Forty-nine percent of the teens surveyed shopped online once a month — and most of them don't even have credit cards yet. This number will increase, according to the study, once they get them.
Millennials shop online more, unsurprisingly: 74% of the millennials surveyed shopped online at least once a month.
Teens shop online for "efficiency purposes."
According to the survey, each generation had different reasons for shopping online.
Sixty-three percent of Gen Z-ers polled said that they shopped online because it "saves [them] time," whereas only 55% of millennials said the same. Fifty-three percent of Gen Z-ers surveyed said that "the selection is better online," whereas only 44% of millennials surveyed agreed with that statement.
Fifty percent of teens polled agreed with the statement that "the prices are lower online," and only 41% of millennials said the same. Thirty-four percent of teens said that the "products are organized [online] in a way that's easier to shop," and only 21% of millennials agreed with that statement.
Further, Ernst & Young concluded that "Gen Z is most likely to buy online for efficiency purposes."
Gen Z shops in stores because they have a "problem."
According to Ernst & Young's study, Gen Z goes into physical stores because it's "functional" — not because it's born out of "true desire."
Fifty-eight percent of teens surveyed said that they wanted to see and feel the product. Fifty percent said it was to avoid the cost of shipping. Forty-three percent said it was because it helped get the product faster. Seventeen percent said it was because they didn't have a credit card.
Merriman said:
If they're [teens] coming to your store, it's not because they just want to buy a product. If they wanted to do that, they could do that anywhere. [They can] do it online. Coming to the store is to solve a problem. It's because they have a need, whether it's a need to browse, or they don't know what they want ... or they're not sure about the sizing of your clothes or whatever it is.
Millennials care about bargains more than teens.
Millennials care more about prices than teens. This is arguably because they came of age during the recession.
Sixty-seven percent of millennials surveyed said that they would go to the website to get a coupon, whereas only 46% of teens polled said they would do the same.
Millennials are also more attuned to ads — 71% of millennials polled said they saw an ad online for a store before making a purchase, and only 59% of teens said the same. Fifty-nine percent of millennials surveyed said they had received an alert from a shopping app on their phones before purchasing, and 38% of teens said the same.
More millennials ask for help or use online customer service than teens.
Sixty percent of millennials surveyed said they would speak with a sales associate before making a purchase in a store. Forty-seven percent of Gen Z-ers polled said the same. Forty-nine percent of millennials polled said they'd use a live chat before making a purchase, but only 24% of Gen Z-ers polled agreed with that statement.
Teens care more about "experiences."
"Both millennials and Gen Z through the recession ... part of it's been learned, some of it's been trained — that products are no longer the cool thing," Merriman said.
"It was cool to save a dollar ... and save money and get something for really cheap. Through that whole process they've learned the value's not in the product or the thing, it's in the experience," she said.
Merriman pointed to going out to eat or going to an event as examples of this. More importantly, they can share this, so now they "actually have something that's tangible," which they might not have had before.
And when it comes to retailers, Merriman said that fast food restaurants — or fast casual — are doing a better job at delivering what teens want than apparel retailers.
Gen Z has higher expectations than millennials.
Think of it this way: Millennials remember playing "The Oregon Trail." They fondly recall dial-up internet and AOL. Gen Z was born into a world with ample technology, so what was a pleasant surprise to millennials is taken as a given for teens.
"When it doesn't get there that fast they think something's wrong," Merriman said. "They expect businesses, brands [and] retailers to be loyal to them. If they don't feel [loyalty] they're going to move on. It's not about them being loyal to the business."
Teens hate feeling like they're disrespected and when things don't work. Millennials don't get as angry when things break.
Teens hate feeling like they're disrespected.
"If you think about these young people ... they've been treated with respect or equality much more so than other generations because so much of their activity does happen online," Merriman said. "Online, nobody knows they're a kid or not."
Merriman said that "within these other areas of their life, they're treated as almost mini adults. They're treated as people with knowledge and respected."
So shopping at a clothing store could be a turnoff. Merriman pointed to a "locked dressing room because they're not trusted. They're given a number for the number items so that they're trying on to make sure they don't steal."
Teens also hate when things don't work.
Millennials grew up getting their AOL access interrupted. But teens can't stand when things don't work, Merriman said, pointing to teen's privacy concerns — "they've already given ... information" when they're online shopping — as one reason for this.
Millennials are more tolerant than teens.
Millennials will give second chances.
"What we've seen is that they're willing to try the website again, just in case it's something that they did wrong or maybe they entered the wrong number, they might be willing ... to give it another shot," Merriman said.
Whereas "Gen Z does not give second chances. Either it works or doesn't and they're on to something else."
Millennials have brand loyalty; teens do not.
"So it really is a level of tolerance and what they're willing to accept, and a degree of brand loyalty," Merriman said. "So millennials still have a little bit of loyalty to different brands or places that they've shopped."
"Gen Z doesn't really have that loyalty," she said.
Teens are influencing the way their parents are spending, more than millennials ever did.
"They're actually challenging parents," Merriman said. For instance, teens are asking their parents, "How much are you gonna pay for that?"
"The parents might not be price-sensitive, but the kids are going to educate upwards, whereas [with] millennials, we didn't see that same type of behavior," she said.
Retails should be focusing on teens rather than millennials — they're a "barometer."
"If you do the right thing by them, you're going to please everyone," Merriman told Business Insider. "If you're focused on just getting millennials, you're going to lose the generation that's coming up behind.
"What I'm suggesting is that they [retailers] understand the needs of Gen Z as the barometer.
"They have the highest expectations. If you please them, you're also going to please millennials — and Gen X and baby boomers and others will be happy."
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