From January 2021 to January 2022, the Consumer Price Index for All Urban Consumers (CPI-U) saw its highest increase, 7.5%, since 1982. While the state of the economy is impacting all generations’ discretionary income and spending habits, it is hitting Gen Z and millennial consumers especially hard. These demographics are launching careers, raising children, and furnishing homes – all activities that require more spending than their older counterparts must do. Gen Z and millennial consumers also may have fewer resources to fall back on in tough times.
Merchants with customer bases comprised of Gen Z and millennial consumers may also feel the pinch as these customers see no other choice than to cut back to make ends meet. VARs and ISVs have the opportunity to help merchants keep these younger consumers engaged and keep revenues coming in. But first, you need to understand these consumers, how they shop, and what will likely help them decide to purchase.
Millennials Consumers’ Buying Habits
The purchasing power of millennials is estimated at $170 billion annually, making this generation a critical focus for merchants. In order to position themselves attractively with millennial consumers, merchants need:
Loyalty Programs: Millennial consumers crave programs that reward them for their purchases. Millennials are 80 percent more likely than any other generation to participate in loyalty programs coupled with their buying power makes a strong case for loyalty solutions.
Social Media Savvy: Almost half of millennials report their purchasing habits are influenced by social media platforms. What’s more, 62 percent of millennial consumers expect to be able to interact with brands on social media. Merchants who engage with millennial consumers on social media are more likely to see increased ecommerce growth than those that don’t.
Brands with a Mission: For 75 percent of millennial consumers, it is important for the brands they purchase from to give back in some way to society, whether elevating eco-conscious practices or giving a percentage of each purchase back to a charity or cause.
Gen Z Consumers’ Buying Habits
One of the biggest things to remember about Gen Z is that they have distinct shopping habits from millennials. For example:
Values and Retention: Gen Z consumers shop with brands that share their values. However, unlike millennials, Gen Z consumers are not swayed into first-time or repeat purchases with monetary incentives like discounts or rewards programs. Aligning with their values is the way to their loyalty, and Gen Z consumers will award it to the most socially responsible, charitable brands.
Discover Brands Digitally: Gen Z use Instagram and YouTube almost daily, and that’s often where they receive their first introduction to brands. Merchants will benefit from having a social presence and not only highlighting their products but how they are using them to make a difference in the world.
Shop Physical Retail: Despite being digital natives, 81 percent of Gen Z consumers like to shop in-store, and 65 percent prefer it. However, Gen Z’s expectations of physical environments include well-curated experiences. They also expect technology that enhances their shopping experiences, including solutions that decrease their time waiting in line.
How Merchants Can Tackle a Tough Economy and Build Loyalty
There are practical ways for merchants to get ahead of the impact of inflation, and VARs and ISVs can help provide the expertise and solutions that generate revenue. Here are six tactics that can help your clients and how you can support them.
- Invest In the Business: A line of credit is vital for tough economic times. However, your clients need to use credit strategically. Effective inventory control and vendor management systems can help merchants make smart decisions about ordering now and optimally manage it in order to hedge against rising prices later.
- Raise Prices: It’s a necessary evil during times of inflation to maintain cash flow and stay profitable. The key is to rely on data analysis to take both guesswork and emotion out of the decision. Your clients can use data from inventory, sales, and payment solutions to understand changing profitability and customer behaviors.
- Offer Buy Now Pay Later: Research shows about 30 percent of millennials expect to use Buy Now, Pay Later (BNPL) options. Merchants need to be equipped for this offering as well as accepting credit securely and conveniently to enable people the ability to buy the items they need.
- Prioritize Loyalty Programs: To win younger consumers, merchants need to focus their customer retention strategies on quality loyalty programs that are integrated with their point of sale (POS) systems for optimal data tracking by both merchant and consumer.
- Control Labor Costs: Merchants have been feeling the effects of the labor shortage, and automating processes using technology solutions is a key opportunity for VARs and ISVs. Help merchants operate with staff currently on the payroll and provide the quality of experiences that will attract Gen Z and millennial consumers.
- Ramp up Marketing: Tough economic times may seem like the time to circle the wagons and pull back on marketing efforts. But it’s not. Encourage merchants to continue to market, offer promotions, and let their customer base know they’re still going strong.
Be a Trusted Advisor, Now More Than Ever
VARs and ISVs know the value of positioning yourself as a trusted business advisor to merchants. They need you now, maybe more than ever before. Leverage your expertise to help your clients win the growing millennial consumer and Gen Z demographics by implementing the tools and payment solutions that help win business during a trying time and win long-term relationships for your business.
It’s also time to evaluate your offerings, identify business opportunities, and close gaps, so you have everything in your portfolio that your customers need. Omnichannel payments are essential for merchants working to appeal to Gen Z and millennial consumers and capture their business on all channels. To learn more about technology that can help your clients face today’s channels, contact Datacap Systems.
