That the pandemic has had sharply negative effects on consumer spending is well known, as are concerns that those effects are about to be even more sharply felt. But new figures from Piper Sandler’s 40th semi-annual “Taking Stock with Teens” report indicate that among the Generation Z demographic, the effect has been particularly pronounced. The study found teen spending has dropped to its lowest level in the 20 years the company has done the report.
Piper Sandler’s survey of consumers under 16 estimated they’ll spend $2,150 on average. That’s a 9 percent decline from 2019, when teens spent $2,371.
And while 2020 has represented an unusually sharp drop, teen spending has been on the decline for some time — peaking in 2006 at $3,023 on average. Last year was already a record low year, with 2020 simply finding a way to lower the basement.
A Foreseeable Fall-Off
A new low water mark was foreseeable, as PYMNTS consumer surveys taken over the past six months have found that younger consumers have been worried about the economy for a while.
When asked in March about what their biggest COVID-19 concerns were, millennials and bridge millennials (a slightly older demographic than Gen Z) cited economic concerns, while Gen Z’s fears were more social in nature. Some 56.5 percent of Gen Z respondents worried that they’d lose contact with people, and 49.7 percent reported concerns about losing access to their activities.
Still, 27.2 percent of Gen Zers were concerned about seeing their work hours cut back, while 20.2 percent were worried about losing their jobs.
Those fears turned out to be well-founded, particularly for younger workers often employed in service jobs as retail clerks, waitstaff, child care, etc. Those segments were hit hard by COVID-19, first by mandated closures and later by tepid consumer response after governments allowed reopenings.
A big reason that teen spending figure has fallen so sharply this year could be largely found in those figures. Teens without jobs or drastically reduced hours are going to do what older consumers do in response to the same situation — start cutting down on their total expenditures.
Where The Cuts Are Most Visible
Piper Sandler found the categories hit hardest by declining teen spending included clothing and apparel, which dropped 11 percent year on year.
Accessories were particularly ravaged. For example, average handbag purchases bottomed out at a record low $87 on average among teen girls.
But in a surprising turn of events, higher-end bags did better than their more reasonably priced competitors. LVMH Moët Hennessy Louis Vuitton, a French conglomerate specializing in luxury goods, bested Michael Kors for the top spot. Teenagers might be buying fewer bags on the whole, but those who are buying are thinking big with luxury purchases as opposed to middle-market brands.
And eCommerce is a powerful draw, with 90 percent of teens reporting they’ve shopped online during the fall season. Amazon ranked as teens’ favored website for commerce, with 54 percent reporting it as their top shopping destination. That’s up from 52 percent a year earlier.
By contrast, department stores have gotten the cold shoulder from kids, with only 33 percent reporting having shopped in one.
Food spending among the young is also declined largely due to lack of access to places to eat out. But food still enjoys a top spot among teenage boys, taking up about 21 percent of their spending. Video games and apparel followed at No. 2 and No. 3, respectively.
For girls, apparel still got the larger share of wallet, although at drastically lower levels. Food and personal care items came in second and third place.
Capturing The Available Conversions
As younger consumers are shopping less in general and concentrating what commerce they do conduct on certain areas, retailers face a mounting challenge to capture the young consumer’s wallet.
Figures show the best way to do that is to give young customers what they want in an environment where they suddenly want some very new things.
According to PYMNTS and PayPal’s recent How We Shop consumer survey, merchants who want to bring in younger consumers must double down on digital capabilities. For example, the How We Shop study found that while 57 percent of all consumers say merchants’ digital-payment offerings will impact their willingness to shop in a given stores, that jumps to 71 percent among Gen Z.
As for what digital-payment offering Gen Zers are looking for, in-store contactless option and a variety of buy now, pay later options at the point of sale are particularly important.
The study also found that younger consumers are looking to shop direct-to-consumer with their preferred brands of choice, with 40.1 percent expressing interest in doing so. Perhaps that explains the sharp nosedive in department store traffic among the segment.
The lesson of the story heading into the 2020 holiday shopping season?
The youngest consumers will spend — if shown what they want in the channel they want. But they won’t buy if they aren’t shown what they want in the way they want to buy it.
Gen Z consumers seem just as happy to not buy anything at all and hold onto their funds until they find merchants who’ll give them what they want.