How small businesses can reach Gen Z customers

Gen Z TikTok influencers Addison Rae (left) and Dixie D’Amelio (right).
Gen Z TikTok influencers Addison Rae (left) and Dixie D’Amelio (right).
Image: Kyle Terada-USA TODAY Sports/Via REUTERS
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Despite their reputation for being addicted to the digital experience, the Generation Z consumer is not an all-Amazon, all-the-time shopper.

These up-and-coming consumers are very rapidly representing a larger slice of retail spending. Indeed, this generation, many of whom are still in their teens, already spends more than $140 billion every year, according to consultancy Barkley Inc. And that’s not counting another $127 billion that doting family members spend on them annually.

The members of this demographic are numerous, too. Morgan Stanley predicts that by 2034, Gen Z (also known as the “iGen” or “post-millennials”) will be 80 million strong and represent the United States’ largest generation.

Mark Beal, an assistant professor in the Rutgers University School of Communication and Information and author of the books Decoding Gen Z and Engaging Gen Z, says this group’s spending power goes beyond what they buy. They “have tremendous influence in purchasing decisions among their friends and family.”

Social media and Gen Z word of mouth

As a generation that both impacts and is impacted by the pervasive influencers on Instagram, TikTok, and YouTube, Beal says Gen Zs can serve not only as loyal customers for small and mid-sized businesses, “but also brand advocates, where they can leverage their social media channels to drive new customers for the business.”

Noting this trend, savvy small business owners, like their larger retail counterparts, have taken to engaging Gen Z-aged “social ambassadors” to engage their friends and followers, Beal says.

For a generation that might be considered skeptical or cynical, word-of-mouth and loyalty arguably matter a lot to today’s coming-of-age consumers. Charlotte Sheridan, managing director of The Small Biz Expert, a digital marketing agency that works with several businesses that target Gen Z, says that while some brands do aim directly for this market, others “just want to make sure that when it comes to products or services, which engender long term loyalty, they get in first.”

Engaging this generation on its home turf—on Instagram or TikTok, rather than TV or newspapers—is critical, she says, adding that these digital natives “want digestible content which gives them enough information to base purchase decisions on, [with] peer endorsement as well.”

Gen Z: digital, purposeful, frugal, different

Every emerging generation likes to believe they are unlike the ones that have come before, even when there is evidence to the contrary. But in many key ways, Gen Z indeed is an often inscrutable group, full of contradictions—especially as consumers. Sometimes known as the “Throwback Generation” for its old-school values, this generation is notably far more ethnically diverse, and more accepting of different cultures, backgrounds, sexual orientations, and gender identities than its predecessors.

Forged in the fire of the financial crisis of 2008—which hit squarely during childhood for many Gen Zs—they value financial security. They are more apt to shop for bargains and fear over-reaching with expenses. Between the growing accessibility of remote work and a desire to live frugally, many experts also see this generation as increasingly more likely to live in small towns, and shop at the businesses located there.

“For the right business, Gen Z can be a game-changer in your customer persona,” says Flynn Zaiger, CEO for digital marketing agency Online Optimism. “They’re passionate, and constantly sharing what’s good and what’s not online. An engaging post on the right account from the right Zoomer can help you sell out in a day.”

But how to win that loyalty and support from the hard-to-pin-down Gen Z? Consider both value and social conscience: A recent McKinsey study found that nine out of ten Gen Z consumers felt they had a “responsibility” to environmental and social issues in their buying habits; and according to the National Retail Federation, roughly two-thirds of Gen Z shoppers look for value when making a purchasing decision.

Perhaps most meaningful to small businesses with a bricks-and-mortar storefront, almost all Gen Zers (98%) say they still shop at physical stores most or all the time, according to a study by IBM and the NRF.

And these iconoclasts are eager not only to make a difference in their purchasing habits, but their lifestyle. Hence a full 72% of Gen Z adults say they eventually want to launch their own business—and they’re typically more sympathetic to other small business owners. Says Beal: “Gen Zs are entrepreneurs who are socially connected.”

Even more populous than the millennials

Citing that this demographic will surpass the much ballyhooed millennials as the largest customer base within five short years, Baskar Agneeswaran, the CEO of Vajro, a developer of mobile commerce apps, believes that any retail business that “discounts the Gen Z demographic is not destined to be successful.”

“Small businesses in particular need to understand how this segment ticks,” Agneeswaran adds. “Fashion, cosmetics, and food and beverages can do particularly well here.”

Beal says the most effective way for any small or mid-sized business to reach Gen Z is to not traditionally market, but instead to “engage this cohort.”

“Gen Z does not respond to traditional marketing and advertising,” he says. While they lack the deep pockets of larger competitors, Beal suggests that small and mid-sized businesses should follow the lead of a national retailer like Target, which created a Gen Z incubator in 2018.

“Target understood the most effective way to market to Gen Z is to connect and collaborate with them on content, campaigns, promotions, products and the user experience,” Beal says. “Small businesses can take that same approach at the local level, collaborating with local high school and college students to form their own proprietary think tank or incubator.”