As Gen Z comes of age, and their spending power and influence grows, Karen Johnson, Head of Retail at Barclays shares her insights on this demographic’s purchasing patterns and motivations, and explains why they are emerging as “a particularly shrewd and savvy generation”.
What sets Generation Z (Gen Z) apart from other age groups when it comes to consumer spending? How have rising living costs impacted their ability to spend on what matters most to them? What has this cohort come to expect from the brands and retailers they engage with?
Spanning students to young professionals, Gen Z is a diverse generation with varied budgets and spending habits. Generally considered to be born between 1996 and 2010, they are arguably the first truly digitally native age group which makes a huge difference to how they shop and spend.
As Gen Z continues to age, their spending power and influence will grow and inevitably shape the way that retail businesses operate. Snapchat Business research suggests that this generation commands $450 billion in disposable income worldwide, with Clearpay and Accenture Strategy data revealing that this demographic is on track to contribute 39% of retailer spending in the UK by 2030. The retail industry cannot afford to ignore this important consumer cohort, and understanding Gen Z’s nuances in behaviour and customer expectations will be critical in ensuring future market success.
“Young consumers take a considered approach, both in terms of how much they spend and what they’re spending on.”
Karen Johnson, Head of Retail, Barclays
Getting to know Gen Z
Gen Z consumers are demonstrating a tendency towards value-driven purchasing – particularly when it comes to political, social and environmental issues. However, rising housing prices and inflation are also undoubtedly putting pressure on Gen Z. As a result, young consumers take a considered approach, both in terms of how much they spend and what they’re spending on. Barclays Consumer Spend research shows that this generation is more likely to place importance on memorable experiences; 47% say they have prioritised spending on having fun and making memories in recent months.
The research also shows that more than half of young consumers feel confident in their ability to spend on discretionary items. Food and dining out are particularly popular with Gen Z, demonstrating their tendency to spend on shared experiences; Barclays data found that Gen Z’s share of spend on eating and drinking is almost twice that of the overall population, at 16% in comparison to 8% respectively.
That said, our data shows that, like everyone, younger consumers are undeniably feeling the impact of rising living costs. According to Barclays research, more than half of 18–24-year-olds in the UK feel under financial pressure – while 84% of the population overall are concerned about inflation.
In light of this, small feel-good purchases have become increasingly popular – and this is particularly true in the case of Gen Z. Young people are quite literally embracing ‘lipstick effect’ purchases, with recent Barclays research revealing that Gen Z increased their health and beauty spending by 17.5% over the past year. Looking and feeling good is very much a Gen Z spending mantra.
“One clear differentiator when it comes to Gen Z consumer behaviour is the cohort’s strong sense of values.”
Karen Johnson, Head of Retail, Barclays
Gen Z: a “shrewd” generation of UK consumers
As a mother of two Gen Z children, I am acutely aware of the financial pressures young people face and the need for them to adopt thrifty spending habits. Compared to other cohorts, Gen Z are more conscientious shoppers – seeking out the best deals before making a purchase, as opposed to hitting the checkout without thinking. Gen Z is proving to be a particularly shrewd and savvy generation.
We’ve also seen this age group focus more on repurposing, reusing and shopping second-hand, with over two-thirds of Gen Zs preferring to buy second-hand rather than new. Charity shops have long been popular with students and Gen Z is no exception to this, viewing second-hand spending as a frugal and more sustainable choice. This group are also attracted to pre-loved goods because they find them ‘more fashionable’ (30%) and are more likely to find unique items not owned by their peers (31%), according to 2023 Barclays data.
Compared to older cohorts, a Gen Z buyer is more likely to consult social media and price comparison websites before completing a purchase – making for a more deliberate shopping experience. But brick-and-mortar stores still have a role to play; Gen Z enjoys the experiential aspect of shopping in real life.
Best of intentions: impulse spending vs sustainable shopping
Like with every generation, retailers can’t take a one-size-fits-all approach when striving to appeal to this group. The diversity of this demographic – who range from live-at-home students to experienced professionals in their mid-twenties – is reflected in their disparate behaviour.
One clear differentiator when it comes to Gen Z consumer behaviour is the cohort’s strong sense of values, particularly when it comes to sustainability. Environmentally conscious consumption is a big trend in this generation: research from First Insight shows that 62% of Gen Zs prefer to buy from sustainable brands, while 72% are likely to make purchases based on personal, social and environmental values.
However, financial pressures mean that it is not always possible for Gen Zs to adhere to sustainable values when sourcing products, and fast-changing fashion trends on social media can often influence their spending. With new research from Hamptons showing that Gen Z will be paying twice as much for mortgage repayments compared to older generations, economic difficulties are affecting this age group’s online retail behaviour. ‘Doom spending’ – the act of making impulse purchases to soothe anxieties about socio-economic issues – ties into this trend of impulsive shopping, with the #TikTokMadeMeBuyIt hashtag now counting for plenty of videos on the social media platform.
The future of Gen Z spending
The rise of social media and AI is already revolutionising shopping across demographics, but Gen Z’s digital prowess means that the popularity of emerging forms of e-commerce, such as in-app purchases, for example, will only continue to grow.
For retailers wanting to appeal to Gen Z shoppers, it is essential to have a compelling product offering as well as a strong social media presence that taps into influencer marketing and content trends.
From conversations that I’ve had with retail clients, a commitment to environmental responsibility is a meaningful way to connect with consumers, for example by selling high-quality products that will last and championing recyclable packaging. Committing to sustainable practices will be key for future Gen Z brand engagement, as this generation will come to expect a solid sustainable commitment as a standard for retailers. Learning how to market both online and in-store experiences creatively will also help the retail industry to tap into Gen Z’s spending power. Increasingly, brands are turning to experiential retail – and I think that this will be a key growth area for Gen Z, who enjoy combining physical ‘showroom’ shopping with online browsing.
Gen Z will account for 30% of the workforce by 2030 – and this presents a major opportunity which the retail industry should seize. Given their future spending power, adapting to Gen Z’s habits should now be central to retailers’ long-term strategy.
About Karen Johnson
Karen Johnson is National Head of Retail and Wholesale for Barclays, and also acts as Head of Corporate Banking in the North West. Johnson has over 30 years experience in banking, working with owner managed businesses through to large corporates. She has worked in a senior capacity in roles spanning business development, business turnaround, portfolio management, real estate, and large corporates. Alongside her day-to-day role at Barclays, Karen is a board member of the North West Development Committee for the Princes Trust, and is passionate about improving inclusivity in the workplace.
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