Gen Z. Digital natives. Socially conscious. The future of consumerism.
This generation, born between 1997 and 2012, is coming of age in an interconnected world. Yet, despite their global outlook, Gen Z's consumer behaviours are far from homogeneous. From Shanghai's bustling streets to London's trendy cafes, Gen Z's spending habits and brand preferences vary significantly across emerging and developed markets.
As we conclude our series on Gen Z insights, we delve into the differences and similarities across geographies for this unique generation. By examining current behaviours and trends, we aim to provide a balanced perspective on the future of these consumers, regardless of their location.
Written by: Andrew Mazalkov
Gen Z's Economic Power: A Global Perspective
Figure 1: Population projects for various generations over time
Source: World Data Lab Projections
A recent report by World Data Lab and NielsenIQ, cited in Wolfgang Fengler's Project Syndicate article "Gen Z's Growing Consumer Power" reveals that Gen Z is poised to become the largest and wealthiest generation in history, with benefits more evenly distributed globally compared to previous generations. Despite challenges like the COVID-19 pandemic and the climate crisis, Gen Z enjoys greater spending power than their predecessors across all continents.
However, the distribution of this economic clout varies significantly between developed and emerging markets. Fengler notes that only 10% of Gen Zers are from North America or Europe, while they comprise 33% of the population in Sub-Saharan Africa and 28% in South Asia. This concentration in emerging markets means that 55% of Gen Z's total spending comes from these regions, with Asia alone accounting for one-third.
According to GMAC's "Gen Z in the GME Pipeline" report, Gen Z comprises two billion people, or roughly a quarter of the total global population. The report predicts that total Gen Z spending will rise sharply once the entire cohort enters the job market, from $9.8 trillion today to an estimated $12.6 trillion by 2030.
Emerging Market Trends: Brands and Beyond
Figure 2: Percentage of consumers willing to try new brands
Source: Nielsen Global Consumer Loyalty Survey
Gen Z is already a force in the marketplace. Depending on which estimate you prefer from Reuters, members shape between $144 billion and $600 billion of their — and their families' — purchasing decisions.
The RBC Global Asset Management team delves deeper into the power of brands in emerging markets, identifying key drivers that will shape Gen Z consumption in these regions through their insights report, "The future of emerging markets: Brands". They highlight the importance of product offering, innovation, distribution networks, and customer engagement in building strong brands that resonate with EM consumers.
Rising urbanisation, income levels, and digital adoption are fueling the growth of brand consumption in emerging markets. The RBC GAM team notes that "the urban populations in EM are expected to reach circa 4bn by 2030, approximately four times higher than those of developed economies". Additionally, the total value of digitally-influenced purchases in EM is expected to grow from $1.8 trillion in 2017 to $3.9 trillion by 2022.
The GMAC report also highlights that nine out of ten members of Gen Z live in Asia and other emerging markets. India stands out as a key country to watch, accounting for 20% of Gen Z globally. As the country's young become more affluent, their financial needs will also grow – and they will expect these needs to be met with the technological sophistication that applies to other areas of their lives.
Demographic factors also play a significant role, with Millennials and Gen Z accounting for 54% of the population in emerging economies, compared to 43% in developed G7 countries. These younger consumers are more willing to spend on branded goods and experiences, driving trends like premiumization and the rise of local brands that better understand regional preferences. Antoine Duvauchelle, Adjunct Professor of Entrepreneurship at INSEAD, believes that the next generation will choose brands and products they can relate to, expecting a deeper connection and mostly interacting through digital distribution channels. More of Antoine’s insights can be found in the UBP report he has been quoted from.
Developed Markets: Distinct Priorities and Preferences
Figure 3: Gen Z populations across developed and emerging countries
Source: UN
While Gen Z in emerging markets is characterised by a focus on value, affordability, and local brands, their counterparts in developed markets exhibit some distinct traits. As digital natives with higher disposable incomes, Gen Z in North America and Europe has heightened expectations for personalised, seamless digital experiences and is willing to pay a premium for brands aligned with their values, as noted by Schroders Wealth Management in their “What investors need to know about Gen Z” report.
Gen Zers expect more from companies than millennials do, and they're less likely to be brand-loyal than any other generation. They enjoy a good meme, but they have a serious side, and are guided by their morals and conscience. They will not only abandon, but cancel, brands at the first signs of hypocrisy or misconduct.
Self-expression and individual identity are also key priorities for Gen Z in developed markets, influencing their brand choices and engagement with companies. They seek out brands that authentically represent their beliefs and lifestyles, and are quick to abandon those that don't measure up. Sustainability is another crucial factor, with Gen Z consumers in developed markets increasingly expecting companies to demonstrate their commitment to environmental and social causes.
The GMAC report notes that Gen Z in developed markets like North America and Europe has heightened expectations for personalized, seamless digital experiences and is willing to pay a premium for brands aligned with their values. Self-expression and individual identity are also key priorities for Gen Z in these markets, influencing their brand choices and engagement with companies.
Looking Ahead: Converging or Diverging Trends?
Figure 4: Survey responses to question:
“Which of the following do you most commonly use to get information?”
Source: Oliver Wyman Forum/The News Movement Gen Z Survey
As Gen Z's economic power grows, the question remains whether their consumer behaviours will converge or diverge across global markets. While increasing digital connectivity and globalisation may lead to some common trends, the unique economic, cultural, and technological contexts of emerging and developed markets will likely maintain some distinct differences.
Brands that hope to succeed in this complex landscape will need to strike a balance between adapting to local preferences and leveraging global trends. By understanding the nuances of
Gen Z consumption patterns in different regions, companies can develop targeted strategies that resonate with this influential cohort.
Gen Z is expected to be the world's highest-paid spending power group in the next decade. According to Bloomberg, in 2021, Gen Z was mentioned more than twice as often in earnings calls as it was in 2020, and as more reach adulthood, they will become the largest consumer demographic in history. An Oliver Wyman publication, “A-Gen-Z Report” explores these figures with more detail for further reading.
As highlighted in the GMAC report, Gen Z's economic power is set to grow significantly in the coming years, with their total spending projected to reach $12.6 trillion by 2030. This presents both challenges and opportunities for brands seeking to navigate the complex landscape of Gen Z consumer behaviours across different regions.
Ultimately, the rise of Gen Z presents both challenges and opportunities for brands worldwide. As Fengler concludes, "Only by catering to this rising generation of young consumers can today's companies set themselves up for future success". The brands that embrace the diversity and dynamism of Gen Z, from Shanghai to London and beyond, will be the ones that thrive in the years to come.
Gen Z's ascent marks a pivotal shift in the consumer landscape. As this tech-savvy, pragmatic, and socially conscious cohort comes of age, their distinctive values and behaviours are redefining the rules of engagement for brands across industries.
To win the hearts and minds of Gen Z, companies must embrace authenticity, agility, and a genuine commitment to the causes that matter most to this generation. From harnessing the power of social media and personalised experiences to adapting to evolving digital landscapes, the brands that succeed will be those that stay attuned to Gen Z's unique needs and expectations.
But the impact of Gen Z extends far beyond the realm of marketing strategies. As this generation's influence grows, their core characteristics are poised to reshape consumer behaviour on a broader scale, permeating other generations and societal norms.
In many ways, Gen Z represents the future of consumerism itself. Brands that take the time to understand and adapt to this generation's distinctive attributes will not only cultivate lasting relationships with a powerful consumer base - they'll position themselves at the forefront of a new era in consumer culture.
Pleasing Gen Z may seem like a tall task. But this group of workers arrives with incomparable digital skills and a greater sense of purpose and desire to make a difference. Companies that can adapt will harness the unique passion and skills of this generation.
The rise of Gen Z is not just a challenge to be navigated - it's an opportunity to innovate, to evolve, and to shape the future of business and society as a whole. The brands that embrace this opportunity with authenticity, agility, and purpose will be the ones that thrive in the years to come. The future is Gen Z - and it's already here.
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