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Welcome back! This week, we’re talking about Gen Z’s approach to spending … and spending … and spending …
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Luxury ice is a thing now. Not “ice” like jewelry. And not “ice” like Ice Spice (sad). Ice as in ice cubes.
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Logo-stamped and flower-suspending $14 ice cubes are just the tip of the ice … berg. Across social media, influencers show off stocked freezers exclusively dedicated to cultivating their cute ice creations contained in varying geometric silicone ice molds. The videos rack up millions of views and draw in thousands of dollars from affiliate links and sponsored content income.
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It’s just one of many head-scratching Gen Z spending habits that have bubbled up lately. Other reported trends include Gen Z moving back in with their parents to save money … so they can invest in an Hermès Birkin bag (those can cost more than $30,000); Gen Zers cohabiting with their SOs to save money on skyrocketing rents (presumably, not to buy a Birkin); Gen Z paying rent with credit cards; Gen Z YOLO-ing all over the world on vacations, even if they’re likely to get themselves into debt doing so.
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Confused? Not surprising.
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McKinsey research indicates that Gen Z is willing to spend on experiences that enrich their daily lives (though how they determine what enriches their lives, like spending on wellness and self-care, differs from previous generations). They’re at once willing to spend on luxury items (but again, how they define luxury differs from previous generations) and fast fashion, all while demanding brands adopt sustainable practices. And Gen Z continues to spend money, even as other generations rein in spending, given higher prices and market volatility.
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So how is anyone—executives, economists, and parents, among other interested parties—supposed to make sense of these conflicting habits? For one, remember, Gen Z isn’t a monolith. In fact, when isolated from the rest of the population, a McKinsey segmentation analysis (a fancy way of describing how marketers split up a set of consumers into different groups) found that Gen Z breaks down into the same consumer segments as other generations: customers driven by value, those driven by quality, and those driven by image.
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It turns out that consumers aren’t automatically segmented into one of these buckets according to where they are in their life. Instead, there are more people from every generation shifting away from the value segment (shoppers who make purchases based mostly on the price of something) into the image segment (shoppers who are more motivated by purchasing a good that signals something to everyone around them).
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We may not yet have answers to questions like, “Will Gen Z’s spending habits follow them into middle age?” or “What will Gen Z do when they find out Hermès doesn’t immediately sell a Birkin to everyone who has the cash for one?”
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For brand leaders, it is daunting to figure out how to connect with and sell things to this enigmatic generation. There are some anchoring principles worth abiding by, regardless of how Gen Z’s money habits evolve: if a brand can address a larger “why”—its raison d’être rather than simply enabling Gen Zers to scratch their impulse shopping itch—it’ll probably be better off in the long run. (Take it from this 15-year-old tech wunderkind: the one thing you can’t duplicate is a brand.)
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Every generation’s approach to money is shaped by the events they lived through during their most formative years. It’s possible we may be overestimating the long-term impact that the pandemic and the subsequent revenge spending cycle have had on how Gen Z spends, particularly as the state of the global economy is …
¯\_(ツ)_/¯.
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Or maybe Gen Zers will turn 40 and still be filling their freezers with trays and trays of wildflower-infused luxury ice.
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Impact investors have gravitated toward areas like financial inclusion and health equity to increase opportunities for Black people while also generating returns.
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