By 2020, Generation Z consumers (or Z-lennials)—those born in this century or just before—will make up 40 percent of all consumers, according to some industry estimates. That makes it critical for retailers to successfully connect with and engage this generation now to ensure lifelong and profitable relationships.
But retailers are making a host of mistakes, China experts warn, from confusing Gen Z with millennials to missing the current mania for limited-edition luxury to picking the wrong celebrity endorsements. Too many brands are also retrofitting existing sales strategies and marketing campaigns to a fundamentally different, and highly snobby and critical, market. And, despite the demand, many international luxury brands are still struggling to connect with Z-lennials at all, and have been allowing emerging local brands the chance to take the lead.
Experts say it’s imperative for brands to move from a “localize for China” mindset to a “lead from China” mindset when it comes to their global digital transformation efforts since the Gen Z population is now exploding in China. And, as many are from one-child families, they have greater disposable income—and a taste for luxury.
Gen Z shoppers, according to Ray Ju, senior consultant in New York for brand consultant agency Labbrand, are data-rich and data-dependent. “The quality and quantity of information that they have access to through digital channels provided and created by brands, influencers, family, and friends are tremendous. They rely on that information to make decisions for both online and offline purchases,” he said.
In general, adults in China spend an average of three hours each day on their smartphones, with those in the United States, United Kingdom, Italy, Spain, South Korea, and Canada spending approximately two hours, Labbrand estimates.
“I’d estimate my time being on the phone for around five hours a day,” Yifei Du, a Chinese Gen Z, said. “I also use social media to chat and follow up, subscribe to influencers and get shopping tips from them. Sometimes I will generate my own content on Xiao Hong Shu (Red Book).”
In China, Gen Z consumers are not only digital-savvy but also pioneers of shopping on social media, according to The Current Daily. A stunning 70 percent of them are willing to purchase products on social media. That figure is higher than that of the post-90s generation (58 percent), and the post-80s generation (60 percent).
In China, the top shopping and social media platforms are WeChat, Baidu, and Tmall, the Western equivalents of Facebook, Google, and Amazon. But there are differences in patterns of use: 44.9 percent of Chinese use mobile payments several times a week, vs. 15.3 percent of Americans. And only one percent of Chinese consumers have never used mobile payments compared to 33.9 percent of American consumers who have never tried mobile payments. Chinese Gen Z consumers’ online behaviours are more sophisticated, and their standard of shopping efficiency, enabled by the frictionless experience they enjoy in China, is also higher.
“The major platforms are still leading the market. China’s Gen Z will continue to buy on Tmall, JD or even Wechat stores, especially since those platforms are changing their policies slowly towards counterfeits, making [the platforms] more and more trustworthy. We can see the rise of Toplife by JD.com and Luxury Pavilion by Tmall,” says Juliette Duveau, founder of the Paris-based agency The Chinese Pulse.
Gen Z consumers buy more impulsively and are more willing to pay for faster delivery. Due to a recent Accenture survey, 34 percent of Gen Z consumers said they want same-day delivery, with 27 percent saying they expect delivery within half a day.
China’s Gen Z is also more open towards spending on luxury comparing to their U.S. counterparts, as well as the previous generations in China, who are known for saving money. According to Ju, this new phenomenon is based on several factors, including fast economic development, a lower living cost in China, and easy access to credit. China’s Gen X, on the other hand, tends to research prices aggressively, including those of luxury goods. Limited editions of luxury items carry a higher premium to China’s Gen Z, experts add.
Then there’s the celebrity factor. “Gen Zs will look into the internet and follow celebrities or Key Opinion Leaders, so there is a thing in China called ‘the Celebrity and KOL Economy’, which drives sales like crazy,” fashion designer Angel Chen said. But this loyalty isn’t across the board. China’s Gen Z is more likely to follow local celebrities they can relate to, particularly in looks or body image, she said, unlike perhaps Kim Kardashian.
What stands out in this generation is that China’s Gen Z has a stronger sense of Chinese pride because they grew up in an era when China had already become a strong global power. So, “from a branding perspective, presenting a brand with only a Westernized image is simply not enough for luxury markets anymore,” Ju said. “It will need to have a nice and effective Chinese name, a stand-alone message and communication plan for the China market, and respect for local culture and purchase habits during both online and offline experiences.”
Based on a March report by Credit Suisse, Chinese pride is a main drive for young consumers. For example, the percentage of consumers between 18-29 years old who would prefer to buy domestic sportswear brands over international ones has increased to 19 percent in 2017, compared to 15 percent in 2010. According to Credit Suisse’s head of China Consumer Research Charlie Chen, “Made in China” is no longer considered bad at all.