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How Millennials and Generation Z Are Driving New Spending Methods

The retail and commerce industries are emerging from COVID-19 radically altered. These changes stem not only from the pandemic and its rippling after effects, but also from the rapid shifts in consumer dynamics, behaviors, and desires. In this altered economy, millennials and Generation Z are steadily becoming dominant demographics. And businesses need to completely rethink the ways they engage these buyers and how they market to them. 

“Currently we’re looking at Gen Z and millennials that make up 32% of total retail spend in the U.S.,” Marni Schapiro, vice president of global advertising and affiliate partnerships at Afterpay, said in a recent episode of the RETHINK Retail podcast. “And that is going to continue to grow.”

Statistics indicated that Generation Z would become “the highest-paid spending power in human history,” and Schapiro noted that by 2030, when the generation has fully engrained into the workforce and has access to disposable income, it will account for almost half of all total spending. 


Defining Characteristics of Millennials and Generation Z

What really sets these generations apart–and defines their spending habit—is what they have collectively experienced over the last two decades. The 21st century is already notable for two main reasons. 

First, this century already has experienced several defining global events such as the September 11 attacks, the wars in Iraq and Afghanistan, the 2008 global financial meltdown, and the COVID-19 outbreak. These events almost certainly impacted the worldview of these two generations. 

But the radical differences millennials and Generation Z have with previous generations go far beyond these shared experiences. The 21st century is also defined by the lightspeed development of technology and its integration into our everyday lives. Schapiro noted that many millennials and essentially all of Generation Z have grown up in a world where technology is ubiquitous, describing the generations as “digitally native.”

“They do not know life without their phone,” she said. “And they insist that things are done in the way they want it done.” 

Being so connected for so long has made millennials and Generation Z inherently more “savvy” when it comes to marketing. Schapiro noted that this poses a tricky problem for marketers as they try to engage–and sell to–cohorts of these generations.

“[Millennials and Generation Z are] so savvy,” she said. “They know they’re being marketed to, and they believe in authenticity. So the reason I say it’s a tricky step is because a brand just needs to really own their voice, and know what they stand for on any given platform.”


Younger Generations Avoiding Debt

During the podcast, Schapironoted another trademark among younger millennials and Generation Z: an aversion to debt. 

“They see their gen X parents saddled with debt. They are just in it up to their eyeballs and they don’t want anything to do with it,” Schapiro said. “And so they want and need the flexibility of being able to pay over time, but they do not want to deal with traditional credit.” 

These generations have come out of two financial downturns: 2008 and again in 2020. What’s more, they have also watched previous generations become saddled with debilitating debt. Schapiro noted that these younger generations are turning their noses up at expensive loans and high interest credit cards, preferring to pay for exactly what they need, when they need it, with the money they have. 

“They are credit adverse,” she said, referring to millennials and Generation Z. “They are wary of high interest and revolving debt cycles, and they prefer debit cards above all else.” 


Buy Now, Pay Later

One way to avoid this cycle of debt is by adopting the buy now, pay later (BNPL) mentality, which millennials and Generation Z seem to be embracing. 

In her role at Afterpay, a technology company focused on BNPL options, Schapiro has seen first-hand just how popular this method is among younger generations.

According to Schapiro, BNPL has increased by 660% across all generations since January 2020–with Generation Z, it’s up nearly 1,000%. Furthermore, she shared statistics indicating that BNPL sales grew 52% between October and November 2021. 

“This generation…they’re so much smarter,” Schapiro said. 

Afterpay is one of many technology companies, such as Venmo and the Cash App, looking to take advantage of these seismic shifts in payment preferences among millennials and Generation Z. 

The service hosts merchants on its platform that sell their products via BNPL and the statistics indicate this method is giving younger generations more financial freedom. Schapiro noted that using Afterpay will actually save millennials and Generation Z about $459 million in credit card fees. 

“They have found the way that it works for them,” Schapiro said. “And I believe firmly that they will continue this.”