Many in Generation Z can justify shelling out $550 for a Coach purse but not dropping $15 for a Sweetgreen salad. The former is an investment that can look cute in countless TikToks, the latter is a pile of veggies that’s gone in one sitting.
Each generation’s spending proclivities reflect the economy in which it came of age. Baby Boomers, raised in postwar prosperity, chased middle-class milestones like cars and homes. Gen X, burned by the dot-com bust, prioritized saving. Millennials, scarred by the Great Recession, were the YOLO generation, spending on experiences.
Gen Zers — the most online consumers in history — spend to broadcast their personal brands.
“Your social media is basically your resume,” said Angelina Aileen, a 24-year-old marketing and product development manager in New York City.
Aileen scooped up a $114 Manduka yoga mat (at a slight discount), in part, because she knows people will recognize the logo when she posts about it in the online group she founded for yoga teachers. “It shows I’m committed,” she said.
Gen Z, aged roughly 14 to 29, is hyper-aware that the stuff they buy and show off is subject to immediate scrutiny. And that “always on, always judged” mentality is creating new winners and losers in retail. Brands that sell things that stand out online are seeing sales rise, while the Sweetgreens and Chipotles of the world that pitch products that don’t offer much of a flex are seeing a slowdown in demand from this age group for the first time in years.
They’re “more judged than probably any other generation was,” said Bloomberg Intelligence analyst Poonam Goyal. “When you’re being judged, that Coach or Chanel handbag is going to be more of a reflection of you versus that Sweetgreen salad that you picked up.”
Gen Z is spending nearly 20% more, on average, on non-essentials like clothes, beauty and home furnishings than a year ago, according to an analysis of Morning Consult data that tracked four months worth of purchase data through November. That pace is nearly 15 percentage points more than the average for Boomers (aged 61 to 79) and similar to Gen X (aged 46 to 60), the survey found. That’s despite the youngest cohort facing a tight job market, high rents and student debt repayments eating into their paychecks.
“Gen Zs are our fastest-growing segment,” Ajay Gopal, chief financial officer of the luxury resale platform The RealReal, said at a conference in December.
At Tapestry Inc., which owns Coach, Gen Z has powered much of the brand’s recent stellar growth. Coach’s sales spiked 25% in the latest quarter after increasing by nearly that much in the prior three months.
For Coach’s CEO, the trend marks a big generational spending shift. “When Millennials or Gen X were in their early 20s, they were more likely to trade down,” said Todd Kahn in an email. Not so with Gen Z, he said.
He thinks it has everything to do with the Internet. “Young people have always cared about how they’re perceived. What’s different now is the intensity,” Kahn added.
When Ishani Deshpanday spotted a Tabby quilted shoulder bag at Coach’s flagship Fifth Avenue store in Manhattan, it checked a lot of boxes. The design and high-quality leather signaled a luxury look, but it had a more accessible price than European bags.
It “gave me a Chanel vibe, and I know I can’t afford a Chanel right now or anytime soon,” said Deshpanday, a 26-year-old project manager in the construction industry. But saving up three months of her $200 spending budget to buy the $550 Coach Tabby? That was doable.
For Taryn Lamb, a 27-year-old lifestyle influencer who lives in Austin, the things she invests in tell a story about the “new chapter” she’s begun in her life creating a home with her boyfriend. In the last year, she said she buys fewer $22 slop bowls every week and only dines out at more expensive spots on special occasions. At the same time, she spent several hundred dollars on a bed makeover she captured recently for her 98,000 Instagram followers.
This cohort doesn’t yet have enough money to splurge all the time, so they make tradeoffs, or bifurcate, says Sally Lyons Wyatt, chief advisor on consumer goods at Circana. Gen Z will mix private label, or dupe products, with premium brands, she says. Posting about an effective dupe for an expensive facial cream signals savvy shopping, while pricier items — the Coach handbag, Ralph Lauren sweater or Alo leggings — appear again and again online and in real life, effectively amortizing the cost.
Brand matters less for products that aren’t long-term investments. Aileen, for instance, opts for inexpensive versions of the essential oils she dabs on before her yoga practice. And Deshpanday decorated her new rental apartment with less expensive furniture purchased with credit card points. “This is not my permanent home,” she said. By contrast, “my clothes and my bags come with me.”
The idea that Gen Z’s online habits introduce constant, real-time feedback isn’t necessarily a bad thing for some. In fact, it’s what they’re seeking.
In her free time, Olivia Meyer, 24, is part of the Z Suite, a Gen Z advisory group run by communications firm Berns & Co. that consults with executives trying to decode their cohort’s spending behavior. (Aileen is part of the same group.)
“When Gen Z is looking at the products we want to buy, we are asking ourselves, how does this product fit into my personal brand?” she said on a recent podcast for the National Retail Federation.
That’s exactly how Meyer, a buyer at a New York department store, justifies her own investments in $100 salon trips and higher-end products to maintain her signature “micro bob” hairstyle.
The bob “helps me to stand out no matter what I’m wearing,” she said. “It’s kind of like a brand’s trademark.”
Neumann and Fanzeres write for Bloomberg.
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