Home Gen Z Shops Sustainably as Part of Broader Purpose
June 2, 2022
Gen Z Shops Sustainably as Part of Broader Purpose

By Mike Duff

Contributing Editor

As retailers reach out to Generation Z, sustainability has been an important part of their strategy to address social concerns considered critical to their purchasing decisions. Gen Z, however, isn’t one-dimensional, so it’s important to think about members of the generation in broader terms.

Market research suggests Gen Z does make sustainable practices a major part of purchasing considerations, but the demographic cohort itself is at a crossroads, with its youngest members just approaching their teenage years and the oldest entering adulthood. As such, their understanding of social issues and ability to respond economically varies.

Sustainability is an important issue, but it is one retailers and their suppliers should recognize is interwoven with other issues, many traditionally recognized as key, such as price/value, and others, such as transparency, becoming more important. Businesses, in general, should also consider that sustainability may now be an even more important consideration among older consumers than is the case with Gen Zers. As things are evolving, retailers and suppliers may be well serviced by aligning their practices more closely with consumer priorities.

Market researcher First Insight and the Baker Retailing Center at the University of Pennsylvania’s Wharton School surveyed consumers across the United States about sustainable practices and their effects on shopping habits and purchase decisions. They also surveyed retail executives. The results demonstrated that sustainability has become a bigger topic of consideration across demographics, with Generation Z influencing other generations, sometimes to the extent that older consumers are sometimes more environmentally driven in their purchasing today.

Sustainability is an important issue, but it is one retailers and their suppliers should recognize is interwoven with other issues, many traditionally recognized as key, such as price/value, and others, such as transparency, becoming more important. Businesses, in general, should also consider that sustainability may now be an even more important consideration among older consumers than is the case with Gen Zers.

For example, in a 2019 First Insight study, Gen Zers were most likely to say they were willing to spend more for sustainable products at 73%. Two years later, Gen Z had slipped marginally in its willingness, down two points. However, Millennial willingness had increased to 72% from 68%, and Gen X willingness had increased to 78% from 55%. First Insight credited much of the change in overall willingness, which overall gained from 58% to 68%, to Gen Z influencing their Gen X parents. The survey results indicated that Gen Z can prompt older generations in their purchasing decisions generally, First Insight noted.

The vast majority of Gen Z shoppers say sustainability is more important to purchasing decisions than brand names. Sustainability has become such a critical factor in purchasing decisions today that it also beats price in importance across all consumer generations, partially prompted by Gen Z, according to First Insight. Yet, the majority of respondents from Gen Z through Gen X continue to consider quality most important to a purchasing decision. Only Baby Boomers rank environmental concerns higher.

Still, the comparable figures have to be taken with a grain of salt, given that Gen Z is a group that goes from about 11 to 25 years of age. As such, its relationship to money and financial independence varies significantly. Among purchasing factors, Gen Z ranks pricing closest to sustainability in importance. But, when you’re a kid, the question isn’t always if you want to make a purchase, it’s often if you have enough money to consider it.

Marsha Everton, principal and founder of the Aimsights Group, pointed out that differences in purchase decisions based on environmental issues arise more from education and income level than generation. So, in those cases when concern about sustainability is fairly level across generations, which it often is in the First Insight survey, similarity in education levels might play a role in the results.

For her part, Everton said, it’s important to consider that data points don’t paint the whole picture when it comes to consumers and sustainability, especially when consumers are asked to evaluate future actions.

We have learned to be very careful about intent versus actual purchases. The table stakes of price, product and convenience are still the most influential decision-making factors. At higher income levels, the consumers have the luxury of including sustainability in the actual decision. At lower income levels, the decision-making can fall into the “intention gap”.

– Marsha Everton, Principal and Founder, Aimsights Group

“We have learned to be very careful about intent versus actual purchases,” she said. “The table stakes of price, product and convenience are still the most influential decision-making factors. At higher income levels, the consumers have the luxury of including sustainability in the actual decision. At lower income levels, the decision-making can fall into the ‘intention gap.’”

Everton said price, product and convenience are critical to consumers, while sustainability, health and wellness, minimalism and a plant-forward diet are significant trends that now are influencing purchasing decisions.

She said work by the Institute for Sustainable Communities takes a larger view on consumer social concerns. The institute defines sustainable communities as those that manage human, natural and financial capital to meet current needs while ensuring the availability of adequate resources for future generations. From that perspective, it has focused on climate change, income inequality and social justice as elements that should be nurtured in a community to ensure its ongoing health. Consumers who have adopted that kind of thinking are more interested in a company’s purpose than sustainability as an isolated concern.

Younger consumers are more likely to ponder social concerns when they are purchasing, but they aren’t alone in this. The growing definition of wellness as it has been proliferating, one that ties personal, community and environmental health together, has been affecting various sectors across retail and, as a consequence, suppliers.

The chain drug sector is largely reconfiguring to address the growing number of consumers who have developed a broad sense of self-care that incorporates personal health but that extends through the community. The larger social trend takes into consideration local traditions and economic well-being, with the interest in purchasing from small neighborhood businesses and seeking out food and beverages that represent community traditions being significant to purchasing decisions.

It’s worth keeping in mind that the larger trends predate the pandemic. Still, Everton said the pandemic accelerated and magnified these trends including those that the Institute for Sustainable Communities identified.

Everton said research by Hidden Tribes suggests that interest in sustainability and other social trends is real but actions may lag. The research suggests most consumers belong to an “exhausted majority” that has been subject to upheaval and is trying to catch its breath a bit.  Representing 67% of consumers, the group rejects extremism and is ideologically more flexible and willing to compromise with others outside the cohort. The group still wants progress across a range of social issues and isn’t likely to base decisions on a single issue or core group of issues.

The observation could have dual consequences. The exhausted majority might not be ready to take a firm stand on social issues when purchasing. Yet, they are socially aware, even if they may take a reactive stance on issues, withdrawing support from companies that ignore their concerns rather than going out of the way to purchase from those that do.

Yet as they emerge from a trying period overshadowed by pandemic, divisive politics and troubling macroeconomic developments, the exhausted majority might become revitalized and more active in addressing social issues that trouble them, including climate change and the environment.

“Sustainability is important,” Everton said, “and it is also important to keep a balanced perspective on how consumers include it in their decision-making.”

Even how they regard sustainability in action can be complex. Many consumers focus on particular issues of which sustainability is part. According to a Nielsen State of the Industry report, 74% of Gen Zers consider transparency, a factor that touches on everything from product origins to ingredient information to packaging composition, as important. That figure is close to the Millennial consideration, at 79%, and higher than Gen X at 63% and Boomers at 70%.

Deloitte’s Striving for Balance, Advocating for Change study indicated that Gen Zers are worried about the state of the world and are fighting to reconcile a desire for change with the demands and constraints of everyday life, including financial circumstances, even as they try to make  environmentally sustainable choices. For example, 29% of Gen Zers selected cost of living, including factors such as housing, transport and bills, as their greatest concern. Yet, 90% of Gen Zers are making at least some effort to reduce their own impact on the environment and 64% of Gen Zers said they would pay more to purchase an environmentally sustainable product versus 36% who would choose a cheaper product that is not as sustainable.

Gen Zers have a lot on their minds, growing up with issues such as the cost of college education, international turmoil, work/life balance, cost of living and changing wage standards, in addition to climate change and related environmental issues. What’s more, they grew up amid the COVID-19 pandemic, with its influence on how people think about health. They also have varying ways to express their concerns economically, considering they include older children as well as younger adults. As a group, Gen Zers consider sustainability to be important, but how they act on environmental issues varies.

Retail Disconnect

In what might be considered an ironic twist, retailers that pay too much attention to the most politically active consumers may not realize that their efforts to address social concerns have gained some traction. As such, they may need to reevaluate their sustainability and ESG efforts, in general, to determine what’s working, why and how to build on existing strategies.

In its research, First Insight determined that a significant misalignment exists between retailer executives and consumer ideas around sustainability and shopping.

Indeed, even when it comes to relatively good news, retailers are out of sync with consumers. In the research, 100% of retailer executives surveyed said they didn’t believe they are transparent enough about sustainability efforts but 59% of consumers said they were. In a similar vein, 98% of retailer executives believe that consumers expect their companies and related brands to be sustainable compared to 76% of consumers.

Retail executives underestimated the specific factors consumers gave for preferring sustainable brands. Consumers were significantly more likely than retailers to cite reduction of production waste, 23% versus 9%, reducing carbon footprint, 22% versus 11%, animal welfare, 17% versus 8% and improving the environment at 29% versus 17%, as important. The only factor retailers thought was more important than consumers was social signaling at 7% of consumers but 16% of retailers. Although both cite it as important, quality/value is of somewhat lesser importance to consumers, at 85%, than retail executives, at 99%.

In an interesting twist, when it comes to why consumers buy sustainable brands, 29% cite inherent quality, with only 8% of retailers coming to that conclusion. Then, 25% of consumers cite value as a reason to purchase sustainable brands, with just 6% of retailers making that association. In terms of pricing, craftsmanship and durability, consumers are out ahead of retailers by 16% to 6%, 13% to 4% and 12% to 1%. Retailers are more likely to associate environmental concerns than consumers 30% to 26% and personal values, 44% to 19%. The results suggest that, when it comes to sustainability, retailers and consumers have quite different viewpoints on the subject, something worth considering when addressing shoppers.

Gen Z is helping drive sustainability, even among other demographic cohorts, as a purchasing issue, but it isn’t looking at it in isolation. As they emerge into adulthood, Gen Z will become a greater economic force and an even greater influence on the marketplace, but how they align their values and their purchasing is likely to be complex.

Although what consumers cite as important and how they make a final purchase determination is hardly in lockstep, 72% of consumers polled told First Insight that sustainability is very or somewhat important when they are considering a purchase. In addition, 68% of consumers say they will pay more for sustainable products while only 34% of retail executives believe that.

So, purchasing decisions, even among consumers who are the most concerned about environmental issues, still are complex when applied to purchasing. Gen Z is helping drive sustainability, even among other demographic cohorts, as a purchasing issue, but it isn’t looking at it in isolation. As they emerge into adulthood, Gen Z will become a greater economic force and an even greater influence on the marketplace, but how they align their values and their purchasing is likely to be complex. Because of that, retailers and their suppliers could be well served by detailed research that can translate into effective outreach and product development. Many businesses have taken a sincere approach to sustainability, in part to get ahead in attracting Gen Z consumers. Too narrow an approach to them, however, might not work as well as hoped.

Then, the issue of influence is one that’s worth evaluating. First Insight concluded from its research that Gen X,  a demographic cohort that is in its prime earnings years, has been influenced by Gen Z and has demonstrated more willingness to spend based on eco-friendliness. As it turns out, Gen X now is the one most likely to say it expects brands to become more sustainable, at 84% versus 78% of Millennials and 73% of Boomers and Gen Zers.

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