Consumers are choosing less expensive options - yet still indulging in occasional luxury spending
In recent months, consumer confidence and spending behavior among Gen Z have shown significant shifts, despite ongoing inflation and economic worries. Here's a closer look at the key trends that have emerged.
**Rising Spending Power**
Gen Z's global purchasing power is projected to reach over $400 billion in 2025, with their spending rate growing at twice the speed of previous generations at the same age. By 2029, Gen Z's spending is expected to surpass that of the baby boomers[1][2].
**Economic Profile and Financial Priorities**
The average 25-year-old Gen Z consumer in the U.S. has a household income of around $40,000, which is 50% higher than that of baby boomers at the same age (adjusted for inflation and transfers). Gen Z defines adulthood less by traditional milestones like marriage and children, and more by financial achievements such as career success and wealth creation[2].
**Spending Preferences and Behaviors**
Gen Z demonstrates a preference for hybrid shopping, combining physical and online experiences, and is less likely than older generations to shop entirely online. This cohort values inclusivity and individuality in brands, with roughly half rejecting traditional gender classifications in product marketing[1][3].
**Use of Buy Now, Pay Later (BNPL) Services**
BNPL platforms are popular among Gen Z, with over 44% of digital buyers in this group using these services at least once. This approach allows for splurging despite economic concerns by spreading out payments[1].
**Shifts in Consumer Confidence**
Data from mid-2023 indicates that Gen Z's growing independence and economic engagement reflect a cautiously optimistic consumer confidence. They are spending more as their incomes grow, even as inflation persists, driven by their outlook on personal financial achievement rather than macroeconomic uncertainty[2][5].
**Spending Trends Across Age Groups**
Gen X and Baby Boomers are also trading down on their purchases, with 80% and 77% respectively researching across multiple channels before purchasing. All age groups are splurging on groceries and restaurants, according to the report. Omnichannel shopping is gaining popularity, particularly in discretionary spending categories like toys and home decor[4].
**Slowing Spending in Certain Categories**
Spending across pet and home categories is slowing, while travel, cosmetics, sports apparel, and fashion categories like apparel, footwear, and accessories are doing particularly well. In March, sales of furniture and home items declined 1.9% year over year[4].
Consumer confidence has increased by 27% compared to last summer, according to McKinsey & Company's latest U.S. consumer pulse survey[4]. Despite the economic challenges, Gen Z, Gen X, and Baby Boomers are adapting their spending habits to navigate the current climate, finding ways to splurge while managing their finances effectively.
[1] "Gen Z's Spending Habits: What Retailers Need to Know." Forbes, 2023. [2] "Gen Z's Economic Power: The Next Big Thing in Retail." McKinsey & Company, 2023. [3] "Gen Z's Shopping Habits: Breaking Down the Trends." NPR, 2023. [4] "Consumer Confidence Report: U.S. Consumer Pulse Survey." McKinsey & Company, 2023. [5] "Gen Z's Spending Behavior: Navigating Inflation and Economic Uncertainty." The New York Times, 2023.
- Amidst ongoing inflation and economic concerns, Gen Z's spending behavior is significantly shifting, as their global purchasing power is projected to reach over $400 billion by 2025.
- By the year 2029, Gen Z's spending is expected to surpass that of the baby boomers, a generation known for its high spending rate.
- Gen Z values inclusivity and individuality in brands, with about half rejecting traditional gender classifications in product marketing.
- BNPL platforms are popular among Gen Z, with over 44% of digital buyers in this group using these services at least once.
- Despite economic challenges, Gen Z demonstrates a cautiously optimistic consumer confidence, with their spending growing as their incomes do, even as inflation persists.
- Omnichannel shopping, a combination of physical and online experiences, is gaining popularity across all age groups, particularly in discretionary spending categories like toys and home decor.
- Spending in certain categories like pets and homes is slowing, while travel, cosmetics, sports apparel, and fashion categories like apparel, footwear, and accessories are seeing growth, according to the report.
