On today's podcast episode, we discuss what people get wrong about Gen Z’s path-to-purchase, their relationship with stores, and how they differ from millennials. Listen to the conversation with our analyst Sara Lebow as she hosts analysts Blake Droesch and Paola Flores-Marquez.

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Episode Transcript:

Sara Lebow (00:00):

Let eMarketer analyze your data. Our custom reports marry original survey data with your company's proprietary data and perspective to create branded analytical reports for your marketing campaigns. Lead the narrative around key topics. Visit emarketer.com/advertise to learn more. Hello, listeners. Today is Wednesday, September 18th. Welcome to Behind the Numbers: Reimagining Retail, an eMarketer podcast. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebow. Today's episode topic is the Gen Z path to purchase. Let's meet today's guests. Joining me for today's episode, we have senior analyst Blake Droesch. Hey, Blake.

Blake Droesch (00:51):

Hey, Sara. Good to be here.

Sara Lebow (00:53):

Good to have you. And also with us is analyst Paola Flores-Marquez. Hi, Pao.

Paola Flores-Marquez (00:59):

Hey.

Sara Lebow (01:00):

Welcome back to the podcast. Okay, let's start off with the beginning of the path to purchase, which is awareness. The physical store is the number one channel where US shoppers of all ages learn about new products. That's according to our Path to Purchase report, which you wrote Blake. So my question is: Is the same true for Gen Z? Does Gen Z value the physical store as much as other generations do?

Blake Droesch (01:25):

Yeah, actually, surprisingly, they do. There wasn't much of a difference comparing the influence of the physical store on Gen Z's brand and product awareness in comparison to any other generation. There were of course some other interesting areas where Gen Z under-indexes and over-indexes, but those different influences didn't do anything really in our survey to diminish the influence of the physical store for Gen Z. So still very much a relevant channel for these digital natives.

Sara Lebow (02:06):

So stores matter. We're spoiling the thesis of this episode early. Also going to spoil what some of those over-indexing for Gen Z stats are. According to your report, 51% of Gen Zers discover products on social compared to 26% of the overall population. So can you point out how Gen Z's path to purchase differs from the general population?

Blake Droesch (02:30):

Yeah. The two big standouts were obviously social media just plays a much bigger role in influencing really everything that Gen Z does but particularly as a shopping channel. This is very different from saying that Gen Z over-indexes with social commerce. So it's not necessarily that the majority of the Gen Z generation are doing all of their shopping within a social platform, including checkout, but the influence at the top of the funnel is really predominant. It's not necessarily they're the only generation though discovering products on social networks. I think for the overall Path to Purchase results, social media was number two behind the physical store for all generations as well, but just certainly more pronounced for Gen Z.

Sara Lebow (03:34):

Yeah. The other thing that was pronounced was, Gen Z was on social using TikTok more than other generations and using Facebook less than other generations. Pao, can you talk about Gen Z's TikTok and social habits a bit?

Paola Flores-Marquez (03:47):

Yeah. So I think when we think about TikTok, it is the quintessential Gen Z application. In the same way that Facebook and Instagram were kind of synonymous with millennials, and now Facebook is kind of synonymous with baby boomers. TikTok was the first app for Gen Zers to pick up and popularize, and they continue to dominate the majority of the platform. We're talking about 44% according to our forecast. So it is where they predominantly hang out and spend the majority of their time. They spend three times more than the general population on TikTok.

Sara Lebow (04:17):

I'm doing my part to make the general population number go up.

Paola Flores-Marquez (04:21):

Thank you. We appreciate that. One interesting thing about TikTok is, it's kind of symbolic of the way that Gen Z's digital world is consolidated all into one place. When I think about shopping and I think about doing my research for shopping, I don't think about doing my research on Instagram. For me, Instagram is for entertainment, and then maybe I'll do my research on Reddit or I'll look at other user reviews on the website for the product. But for Gen Zers, TikTok really is their one-stop shop for most of their daily needs.

Sara Lebow (04:56):

It's interesting you say one-stop shop because for research, entertainment, discovery, definitely. But something that interested me about Blake's report that I don't think you were getting at with one-stop shop is that Gen Z is making purchases in stores. So they're discovering products on TikTok or on social media, but then they're actually making the purchases in-store.

Paola Flores-Marquez (05:17):

Yeah, because going out is fun. I mean think about it. You're growing up in this world where everything is constantly digital and you went through the pandemic and you're in your teens, in your twenties, going out is really fun. So even though the majority of our digital life is online, you still want to find reasons to go out and spend time in the outside world. And also I think we're talking about a generation that really cares about the quality, and I think it's a rite of passage to get scammed on the internet occasionally. And so once you've been burned once or twice, you want to make sure that what you're buying is legit. So I think that kind of plays a role too in their desire to take it offline.

Blake Droesch (05:56):

I think that's really exactly right. There's a really, really strong use case for the way that TikTok operates being conducive to discovery. And obviously, it's a very sophisticated platform with a lot of different shopping integration that's meant to move the customer down the purchase funnel to conversion. But at the same time, it's not just about that. I think both for consumers and for marketers who are operating on the platform, the most valuable service that TikTok provides is that upper funnel awareness. So that's sort of the key piece.

Sara Lebow (06:40):

That's so difficult to measure though. I mean, let's take e.l.f. for example. e.l.f. Beauty, huge TikTok brand, and a common one where if you're searching NARS Lipstick dupe, you'll find an e.l.f. product. But you might not buy that on TikTok, although they are integrated with TikTok shop. You'll probably go into a Target and then buy it or somewhere else. Can you measure that? Can you plan for that? Can you make media decisions based on that?

Blake Droesch (07:06):

That's an inherent difficulty with particularly CPG brands who are still seeing 80 plus percent of sales come from retail channels. It's very difficult to measure your digital investment with your in-store sales, particularly when you're a CPG brand that's coming through a retailer and that sort of a black box. That is one of the struggles of marketers is justifying their digital investments. And I guess to plug the Path to Purchase research that we do, I mean that is really what we're trying to get at the heart of is measuring what is the influence of digital at the top of the funnel, even if it's not directly transacting to a purchase on TikTok, a purchase online in general or a purchase through one of the various retailers or even brand owned and operated stores. It's very difficult and it's very complex. Especially with Gen Z, the takeaway is that these retailers need to be everywhere because there's such a long tail of digital platforms now, and Gen Z is the generation that's more likely to be on more of them or all of them. So there's so many pockets.

Paola Flores-Marquez (08:26):

Yeah, they're juggling so many and they're catching up to millennials on so many of the platforms. They've overtaken them on YouTube, more Gen Zers are... They're about to overtake millennials on Instagram. They are just picking up.

Sara Lebow (08:38):

They use Pinterest way more than I realized.

Paola Flores-Marquez (08:41):

Yes, they love it. And I think they're just more willing to explore all these digital spaces. They're also exploring emerging apps that are switching it up like LOCKit. We all remember BeReal. They're just willing to take that risk and explore those digital spaces.

Sara Lebow (08:57):

Something that I've been thinking about is Z's changing behaviors. You're talking about how they're willing to try new things. Does that mean that their behaviors are going to shift and become more like older generations, or is Gen Z locked into this social-first, buy-in-store model?

Paola Flores-Marquez (09:16):

I think that there are some things that are true for every generation. I think experience of being in your twenties and exploring the world and wanting to get out there is something that every single person goes through. The environment changes dramatically as we've experienced in the last 30 years. But I do think that with millennials in particular, what we're seeing... I think millennials are a good prototype for the digital generation even though they're not fully digital, is that they tend to stick to the habits that they became accustomed to in their twenties. But they do slow down on them. They're not posting as often. They don't feel the pressure to be as active online, but they're staying pretty loyal to the stuff that they learned. They're pretty much stagnant.

(09:59):

I mean, it's also that those platforms are saturated, but they're still fairly active in consumption when it comes to Instagram and Facebook, and Reddit. So I think that we can expect some of those behaviors to stabilize. But yeah, eventually, Gen Zers are going to have to prioritize families and careers and their ideals are going to change, and they're going to be less open to sharing those aspects of their lives because that's just part of growing up. So I think we can expect some of that to shift, but the core habits that they build, unless barring some major new technological advancement that radically changes this.

Sara Lebow (10:34):

Or a TikTok ban.

Paola Flores-Marquez (10:36):

Yeah. Or a TikTok ban. I think we can definitely expect the way in which they search and interact with these things to remain stable for a while.

Blake Droesch (10:44):

I think one of the things that was really interesting about the Path to Purchase research was that Gen Z across the board, they were less likely to make an immediate purchase after discovering a new branded product, and they're way more likely to engage with different online resources in order to research products before they made the purchase. To Pao's point, that really speaks to their life stage, obviously to one degree, less spending power looking from value. But on the other side, I think there's an element of their behavior that's not going to change over time because they're digitally natives and they have an awareness and find value in a lot of the different research tools that the online world has to offer. So I could definitely see, even as spending power increases for the generation, that the consideration in research being more fundamental to the path to purchase could actually remain consistent, and that would be a big difference from older generations.

Sara Lebow (11:59):

Okay. So we've covered that Gen Z like older generations does do most of their shopping in stores. We've covered that, unlike older generations, they're more focused on social media and particularly TikTok. What else is important to know about Gen Z's path to purchase?

Blake Droesch (12:17):

I think another really interesting takeaway is something that it's probably maybe not fairly obvious, but there's probably an inclination that Gen Z is more likely to use their phones beyond their phones when they're shopping in-store. And we found that there was a big over-index there compared to how other generations what were the resources within the stores that helped them aid their shopping discovery. So we asked about everything from speaking to the store associates, marketing activations on end caps, things like that. When it came to the traditional marketing and the interaction with the store employees, Gen Z under-indexed. When it came to using your cell phone, your smartphone when you're in the store, Gen Z over-indexed.

(13:10):

And I think that there are two sides to that. I mean retailers have apps that can help you find products, you can scan barcodes, really use it as a tool that someone of an older generation might rely on a store clerk for. But the other side of it, which I think is probably the bigger piece, is this sort of expanded consideration set that Gen Z shoppers are more likely to be in the store looking up ratings and reviews, getting more detailed product descriptions, seeing if they can get a better deal on the product by going on Amazon or another e-commerce channel. I mean, that's something that we've seen is really big part of Gen Z's in-store shopping behavior.

Paola Flores-Marquez (13:54):

I was in the store with a Gen Z friend the other day, we were at Costco, and she pointed out that the little asterisk on the price tag meant that it was going to be moved out soon. And so she was like, "Wait another two weeks and the price will drop. So we'll come back then." And she was so savvy about it, and I'd never heard of that.

Sara Lebow (14:11):

Yeah. So there are some stores that definitely get the use our app in-store thing right. Target is the clear-cut example of this, I think. People tend to use the Target app in-store. Blake, you've talked about this app before. There are a lot of deals on it. You can make payments through it and get discounts. And that's really good for Target because they get that loyalty information that can translate into retail media dollars for Target also. But that is a little bit unique to Target, maybe Walmart, that people use the apps in-store to navigate. I think for other brands and for those retailers as well, what's important is, once again, social media. It's making sure that people are talking about your brand on TikTok, on Reddit, on Pinterest, so that when people in stores look up the brand, they immediately see a review that says, "Oh, I loved this brand of socks." That's a crazy example. But socks are important. "I love this brand of socks, and they're worth buying."

Blake Droesch (15:18):

Yeah, exactly. When you say that someone's going to pull out their phone and look up something that they've discovered in store, everyone does that, but they're entering that brand name into a different search bar depending on who they are. So if you really want to cover all of your bases, you want to make sure that you have a strong presence across all of these platforms, which of course, includes the apps of the retailers in the stores where you're selling your products. So Target, Walmart, et cetera. It's also TikTok. It's also Reddit. Obviously, Google still very important.

(16:01):

But you want to make sure that in that window, which is fairly short. When people are shopping, they're not putting their feet up and spending a few hours doing research, they're probably doing a quick search on whatever their platform of choice is. And if you want to drive that sale, whether you're a retailer who wants to offer a more competitive price or a brand that wants to offer a detailed description or positive reviews, or just give the customer that warm and fuzzy feeling that's going to make them make the purchase, you've got to be where the eyeballs are.

Sara Lebow (16:38):

Well put. Any final thoughts?

Paola Flores-Marquez (16:41):

I think that one of the most surprising things for me in doing some of this research and reading Blake's report was the realization that Gen Z is a very idealistic generation, but when it comes down to it, it's price point. It's kind of sobering because the reality of life gets us all. There's always going to be a subsection that's very hardcore about their ideals and then another subsection that's negotiable. Yeah, interesting to keep in mind.

Sara Lebow (17:10):

I think that's definitely correct and definitely a thing. I feel like I'm hearing a lot of themes that we hear on this podcast across different generations, but especially with Gen Z, which is that price matters and also that there is a complicated web of data coming from social, coming from retailer websites, coming from Google, coming from in-store, and you have to find a way to weave all of that. You can't just look at any one KPI in a vacuum. Okay, one final plug for both of Blake's reports. His Path to Purchase report and Gen Z Path to Purchase report are both available for subscribers on our website at emarketer.com. Thank you both for being here. Thank you, Blake.

Blake Droesch (17:53):

Thanks, Sara. Always a pleasure.

Paola Flores-Marquez (17:55):

Yeah, thank you so much.

Sara Lebow (17:55):

And-

Paola Flores-Marquez (17:56):

Oh, sorry.

Sara Lebow (17:56):

Pao, you didn't give me a chance to say thank you.

Paola Flores-Marquez (17:57):

I'm so sorry. I was just so excited.

Sara Lebow (18:00):

Thank you for being here.

Paola Flores-Marquez (18:01):

Thanks, Sara.

Sara Lebow (18:03):

Thank you to our listeners and to Victoria who edits the podcast and is very savvy. We'll be back next Wednesday with another episode of Reimagining Retail, an eMarketer podcast. And tomorrow join Marcus for another episode of Behind the Numbers daily.