How Gen Z will impact small business growth
Laura Tien
September 26, 2023
Are you prepared for the new generation of customers who will change the way you do business?
Though it feels like the early 2000s were just a few years ago, those born in 2003 are turning 18 this year. The next generation is taking over, meaning small businesses need to consider them when making decisions. In this article, we’ll go through some of the unique ways Generation Z (Gen Z) will be impacting small businesses and what you can do about it.
First of all, who’s considered Gen Z? Research into Gen Z has loosely determined that it includes anyone born from 1995 to 2010. Though the definition isn’t set in stone, Gen Zers are essentially the true digital natives, people who grew up with Google, social media, and smartphones.
Gen Z are not a more extreme Millennial. In Jason Dorsey’s book, Zconomy: How Gen Z Will Change the Future of Business – and What to Do About It, he explains how they have their own independent behavioural drivers and traits. Engaging with Gen Zers and building brand awareness amongst them is it’s own feat.
“This generation is a group of diverse, hyperconnected, short-attention span influencers who are a force in business across industries, brands and digital platforms,” says Dorsey.
Gen Z want unique small business brand identities
Gen Zers look for brands that strike a fine balance between popular and distinctive. On one hand, small businesses need to show that they’re highly sought after. On the other hand, Gen Zers want to make purchases that set them apart from others. Though there’s a unique opportunity for small businesses to compete against big brands, social proof is still important.
Along the same lines, much of Gen Z create their individual identities through the purchases they make. This means they are more willing to buy from brands that line up with their own, specific values. For example, you can now find fashion labels that don’t categorise by gender and skincare labels that include braille on their products to promote inclusivity.
Offer personalisation and customisation
Another way small businesses can lean into the importance of manifesting an identity through consumption is through offering personalised or customisable products and services. This could be as simple as horoscope-based apparel or as complex as skincare based on DNA. The younger generation are becoming more comfortable with sharing their data and are happy to pay more for personalisation and customisation.
A study conducted by IBM showed that 55% of Gen Zers would want the ability to design products that no else owns. For a small business, this could mean allowing people to add text to products, choose different colours or patterns for each part of a product, or upload their own pictures to add to products.
Gen Z, social media and the rise of “dark social”
Though both Millennials and Gen Zers are known to be avid users of social media, it’s becoming clear that the way these two generations interact with social media is distinct. Across the Asia-Pacific, North America and many other parts of the world, Gen Zers spend more time on social media than millennials. How a brand represents themself online will literally make or break a small business.
Gen Z have considerably strong digital literacy. They carefully curate their own online presence and thus understand how a brand can carefully curate their image. Around half would say social media is the primary influence on their brand decisions. Hence, they have high standards and will quickly discredit businesses that look out of date online. Small businesses need to invest in a strong in-house professional or an agency to maintain their brand identity.
Unfortunately, creating a strong brand identity on social media is just the beginning. Businesses are forgetting to consider the rise of dark social. Gen Zers are no longer sharing content publicly, whether it be for privacy concerns or just because it isn’t the norm anymore. Now, people are sharing content privately through private messaging apps or private groups.
Small businesses need to invest in campaigns that allow people to easily share their brand privately. For example, creating branded GIFs that can be shared on WhatsApp, Telegram or Messenger. Small businesses can also take advantage of private groups, forums and communities on social media networks.
Video content is key to getting noticed
Social media now encompasses a lot more than Facebook and Twitter. Video content on platforms like YouTube and TikTok is key for small businesses looking to build brand awareness. About 70% of Gen Zers find new brands at least once a month on video-based social media. Plus, they’re more likely to than any other generation to state that video is a top three influence in purchase decisions.
Following on from the thoughtful use of social media, Gen Z are very savvy and will be quick to disregard a cringey brand video. Creating engaging videos is a lot easier said than done, especially for small businesses trying to compete in a saturated market. It’s important to understand how to speak to Gen Zers with high-quality videos and unique, exciting ideas.
Online ratings and reviews are at the forefront of decisions
Gen Z put a strong focus on what previous customers have said about a brand. Online reviews and ratings are the new word-of-mouth. In a study done by Dorsey, he found that 68% of Gen Zers will interact with at least three reviews before a first-time purchase. You’ll need to consider written reviews as well as video reviews from customers and influencers.
“Gen Z is the number one generation to write positive things online, to recommend brands and so forth. If you win them, you win them and their friends. It’s a huge opportunity,” says Dorsey.
Outstanding reviews and ratings on social networks, marketplaces, Google Businesses and other platforms need to be part of your entire business strategy. Of course, your product or service itself needs to be at a high standard. Similarly, customer service needs to be quick and helpful. In terms of marketing, using a tool such as Proof or ProveSource can help to increase conversion rates.
Gen Z need financial flexibility
One common trait of Gen Z is their caution with finance. They grew up with their parents struggling with the GFC, and watched Millennials grappling with student debt and rising property prices. Now, Gen Zers are graduating during a global pandemic. This has led the generation to have a stronger desire for stability and greater financial savviness.
On top of that, Gen Zers want payment flexibility and a range of payment options. As a result, buy now, pay later options such as ZipPay and Afterpay are becoming extremely popular by allowing customers to split up the cost of purchases into multiple payments. Gen Zers also want the ability to purchase directly from social networks such as Instagram and Facebook, meaning integrating your business with these networks is essential.
Offer access over possession
The definition of consumption has evolved. Not only does it involve owning products or using services, it now involves having access to them. This could be through the sharing economy or with subscriptions. For example, having access to a video streaming service rather than owning a DVD, or using a car sharing service over owning a car.
Though overhauling your entire business model to line up with this Gen Z trend might not make sense, it could still be useful to consider how you could incorporate these ideas. Can you offer a product or service that can be shared? Are there any innovations you can make that allow consumers to access your products or services in a different way?
This new idea is closely linked to Gen Z’s caution with finance. Gen Zers are looking for ways to enjoy experiences without having to own products. Hence, payment flexibility could also mean allowing customers to turn subscriptions on and off, or to rent products over buying them.
Gen Z are conscious on a budget
The popularity of sustainability and ethically conscious brands with Millennials has remained with Gen Z. However, even though Gen Zers are more likely to hold brands accountable for their actions, the majority aren’t willing to pay more for environmentally friendly products. Small businesses need to strike a fine balance between social responsibility, quality and price to appeal to Gen Z.
Be relevant to your local Gen Zer
On a final note, it’s important to remember that even though there are overarching similarities, Gen Zers will differ depending on local markets. Consider the culture, lifestyle and habits in the areas that your small business is targeting. For example, Australian youth have a much stronger affinity for sustainability compared to other regions.
Make sure your messaging is tailored by asking yourself about your target audience. How much are brands tied to identities? Do people want to stand out or fit in? How much time do people spend researching and engaging with a brand before making a purchase? What marketing channels are most relevant? Questions like these should all be key to your business decisions.
Key takeaways on how small businesses can cater to Gen Z
The next generation’s consumption habits are nothing like those of generations before. For small businesses wanting to target this major market segment, it’s vital that these factors are considered sooner rather than later. Spend time understanding what Gen Zers are looking for and invest in building a brand presence that caters to their characteristics.