Generation Z (Gen Z) were born between 1995 and 2009, they are a cohort that is more populous and influential on consumer spending than any generation before them and they are coming over age and driving retail trends.
A.S. Watson Group (ASW), the world’s largest international health and beauty retailer, puts building customer connectivity at its heart of customer strategy, and has gathered insight from its businesses around the world to compile an overview of what is driving the Gen Z customers and how they can be attracted to its retail brands across the globe.
Malina Ngai, Group Chief Operating Officer of A.S. Watson Group says, “Generation Z is shaping up to have great spending power and they are the future of modern retail. It’s important to stay relevant to them, not only focusing on the products they want, but also the stories and experiences that goes with them. To best meet the demand of Gen Z, customer insight plays a vital role in helping us understand their needs, perceptions and even their shopping behaviour.”
Consumer Powerhouse – Gen Z
In 2019*1 , Gen Z became the largest consumer segment and now account for 32% of the global population of 7.7 billion. A.S. Watson Group operates over 15,200 stores under 12 retail brands in 25 markets and using this extensive network the Group’s insight shows a 23% increase in Gen Z’s spending power in 2018.
The insight shows that on average 86% of Gen Z were beauty shoppers, and over 70% of Gen Z spending is on beauty – the highest among all the generations. In short, Gen Z has become the growth driver of A.S. Watson Group’s business, and is the lynch-pin of current and future plans.
*1 Bloomberg’s research – https://www.bloomberg.com/news/articles/2018-08-20/gen-z-to-outnumber-millennials-within-a-year-demographic-trends
Engaging Personal Experience Matters
While Gen Z is the first generation of digital natives, insight shows that they prefer in-store shopping, they love the social and experience aspects of browsing and shopping at physical stores with their friends. ASW’s customer insight shows that 99% of Gen Z shop offline and they like shopping in “destination stores” (stores in shopping malls and city centres).
The digital natives spend most of their time on screen and they look for brick-and-mortar shopping coupled with technology so in-store digital devices are key drivers to sales success; the introduction of AR and AI in the store environment, as well as the linking of Offline plus Online (O+O) experiences through apps and social media. In recent UK focus groups Chloe Skinner, 19, said “I do look online a lot when I’m planning what to buy but I love shopping in stores with my friends, especially when there are fun things for us to do like playing on the makeup mirrors that let us create pics of ourselves to share on Snapchat.”
Gen Z choose their beauty products based on the trend, price and quality and use their phones to read other users’ feedbacks and reviews while browsing in store.
Connecting with Gen Z
To capture the Gen Z customers, A.S. Watson Group business units across the globe have created campaigns to resonate with their local markets.
In Asia, Watsons China talked directly to students with a series of flash mobs and beauty classes in university campuses. In addition, university students in Beijing, Tianjin, Shijiazhuang and Shenyang were treated to a range of on-campus activities throughout April. The events were designed using research into the habits and preferences of Gen Z, to show them how Watsons aligns with their values and help them live a colourful life.
Understanding that a fun and engaging shopping experience is key to target Gen Z customers, Watsons Taiwan opened a Tech Fun store with technology devices including StyleMe, Tap & Shop and Digital Beauty Advisor. It also created a series of events for Gen Z customers to drive the O+O (Offline plus Online/ O plus O) experience. In Spring 2019, Watsons Taiwan launched the #BeautyMyWay campaign in line with Pantone announcing that ‘Living Coral’ the colour of 2019. To bring this to life, a pop makeup fashion show installation was created in the Xiemending shopping centre with a social mechanic asking customers to share photos of them with coral lipstick on social media in exchange for a free lipstick and coupon.
In Europe, The Perfume Shop has introduced a new digital service – Go in Store – to enhance the shopping experience for its customers and modernise choosing perfume in an age of AI and AR technology. The service connects online shoppers with one of The Perfume Shop’s store experts, in a live video chat, enabling them to get a personalised consultation and be shown around the store from the comfort of their own home. The service launched earlier this month and since then there has been conversion rate increase of over 155% for those interacting with the service.
Sustainability concerns are a big factor for Gen Z customers. Since 2014, A.S. Watson Group banned the use of microplastic in its rinse-off own brand cosmetics or personal care scrub products and by the end of 2019, this ban will extend to all brands too, meaning no microplastic will be found in any rinse-off cosmetics or personal care products sold in the stores.
In the Netherlands, ICI PARIS XL customers earned a discount on purchases in the Bring Your Bottle Back campaign. Over 59,000 bottles were collected in 2018 and over 19,000 bottles were returned this April alone.
In the UK, Superdrug has seen dividends in talking to the Gen Z customers about issues it knows are important to them, it has certified as its own brand beauty and personal care products as cruelty free and clearly signs vegan products in stores and online. It opened a special Little Vegan Pop Up Shop which offered 1,000 vegan beauty essentials.
Further initiatives have seen businesses across the A.S. Watson Group offer customer alternative to plastic bags or incentives not to buy them. For example, by offering customers paper carrier bags, The Perfume Shop stopped 7 million plastic carrier bags being introduced to the UK and Savers introduced a bag for life which almost a million customers bought. Savers also upgraded its standard carrier bag to a more robust reusable bag and this will remove the use of 14 million single use plastic bags each year. In Asia, Watsons Thailand is working to reduce plastic bag usage and running the No Bag Day Campaign which means on the 4th of every month, all members who don’t take a plastic bag receive bonus points, to reward them for joining the green movement.
In conclusion, Malina Ngai, comments; “Generation Z is a very different customer to the Millennials that came before them. They are reinvigorating the retail industry with their desire for experience and activities, while at the same time helping shape a more sustainable future with their emphasis on the environment and doing good.”