Enter Gen Z: Asia’s Retail market in turmoil
In retail business, the concept of convenience used to mean providing a product or a service within a reasonable walk or drive, perhaps on the way home from work or in a town nearby. Traditionally, companies bundle similar products and services within well-defined boundaries and structures, which are easy for them to manage. Whether it is a retailer, bank, insurer, private hospital or a telecommunications provider, you will find similar rigid structures trying to target individual consumers and businesses by separating them into different groups. This grouping, which may provide convenience to the service provider, adds little or no value to the individual or the business.
Now a new generation of influencers has come on the scene. These new kids on the block, commonly known as Generation Z customers or simply Gen Z, are responsible for turning this established business model upside down. The acronym Gen Z refers to the people who are roughly born between the years 1995 and 2010. They are, in every sense of the word, true digital natives where they live, work and consume differently. Almost from birth, they have been living with exposure to the Internet, social networks and mobile devices. Today, these customers play by a different set of expectations and rules. Driven by technology and an on-demand culture, younger generations of consumers have grown up with products and services that are available at the push of a button, anytime and anywhere. True convenience for these digital natives means that the products and services are available to come to them at a time they prefer. While every industry is scrambling to realign its approach to address this new generation, many retailers are missing a crucial insight: Gen Z is looking for ultimate convenience and the existing rigid product and service verticals are failing to provide them with that.
In a regional market research conducted by Rakuten Insight, the consumer market research giant from Japan in partnership with Tofugear, surveyed nearly 6,000 consumers across 12 markets in Asia. This survey was to carry out a comprehensive analysis of the shopping habits of today’s connected consumer whether it be online, in stores or through online marketplaces. The survey found that while 61% of all users use their mobile phones at least 4 hours a day, almost 25% of Gen Z use their mobile phones more than 8 hours a day. A whopping 75% of Gen Z wants to use Mobile payments while a 40% already makes purchases on their mobile phone at least once a week. Gen Z members cannot remember a world in which the Internet was not constantly available to them. These kids can sniff out insincere messages in seconds and will take the time to meet them and create meaningful conversations. Confirming the above, survey found that 55% of the Gen Z users have made a purchase because of content shared by an influencer. Their preference for online shopping was clear, as 60% of the users tend to be loyal to brands that offer free shipping. Statistics show that Gen Z would represent 40 percent of all consumers by 2020, which puts Asia’s traditional retailers in a dilemma as to how they are going to address this new generation effectively.
Everything must speed up
Gen Z has a very short focus span in listening to sales pitches and uses a limited amount of time to assess whether something is worth spending their time. Getting past these filters, and winning their attention, will mean providing them with engaging and immediately beneficial experiences. Several statistics claim that the average attention span of Gen Z is only 8 seconds. However, this is certainly not a generation that is attention-deficient, but rather people with an eight-second filter. Therefore, retailers do not have time to waste with Gen Z and once they capture their attention within this narrow focus span, they need to keep it by being responsive and engaging.
From birth, Gen Z has had a unique relationship with a powerful force, modern technology. They are the first to grow up online, connected to vast amounts of timely, global information and socially connect to friends, businesses, other organizations and even celebrities instantly. They do not refer to traditional maps when traveling or stop to ask for directions nor would they just blindly believe the product reviews available on the Internet, but rather verify facts via their social networks. They have never known a world where they could not instantly connect and look up the answer to any question that crossed their mind. There is no need to believe anyone blindly, or to hide from the unknown. They can figure it out for themselves in their preferred place, which is online and social networks. When your perceived map of the world is an Internet-equipped smartphone with Google maps as an enabler, local has less to do with being close to your home, but more to do with relevance to fit into your lifestyle.
Gen Z is not willing to wait when it comes to online shopping. A staggering 85% of modern shoppers expect associates to have instant access to price and inventory information. Hence, their decisions will be informed and swift, indicating that both mobile checkout and mobile browsing will become necessities in the coming years. Since 60% of Gen Z consumers would not even use a web site that is slow to load, retailers need to take steps to remove unnecessary links, photos and files from their web sites that may be slowing things down. To achieve competitive advantage online, it would just take two hundred fifty milliseconds, either slower or faster. This is the time to gain or lose a new customer in online retail business, thus, at the rate in which online business is growing in Asia, the retailers are in turmoil to keep their businesses intact.
Follow Social Media Trends
Gen Z spends a lot of time on social media, thus, advertising on those platforms needs customization to fit their needs. Hence, retailers must be incredibly social media-responsive to reach them. This requires an awareness of what platforms Gen Z consumers are using to do their shopping. Stores Magazine reports that 44% of Gen Z shoppers use Snapchat while shopping in-store while 45% of Gen Z rely on Instagram to find cool new products. However, 40% still rely on Facebook, which confirms that it is still not an old people’s platform just yet. Gen Z consumers use their mobile devices to browse for product ideas on social media, to interact with other shoppers, to make purchases and to share about their new knowledge with their followers. Survey confirmed that they take a brand’s commitment to social good into consideration when making purchasing decisions.
Currently many Gen Z are brand-averse and frugal. As retailers are evolving to adapt technology and provide a different experience, they will also have to be mindful that Gen Z want even more from their shopping experience than any prior generation has ever demanded. They use their smartphones and tablets as research tools before they set foot in a brick-and-mortar store, while inside the store, retailers need to offer mobile shoppers detailed information about products and services that will help move them down the path to purchase, even if that purchase is not online. A whopping 53% of Gen Z searches online for other items they prefer that are not available in the store they are in while 52% compare the price with competitors and 51% search the web for coupons, discounts or promotions, thus, retailers are in a constant flux to keep pace.
Impact on Sri Lanka’s Retail
Mr. Channa de Silva, General Manager / Chief Executive Officer of Lanka Clear is very excited about the fact that concepts like Uber and PickMe have begun to dominate the market. “This is exactly what Gen Z has been waiting to experience.” It is no more a pipedream to be able to order dinner after work from a small boutique food outlet and get the food delivered via a delivery service such as “Uber Eats”, “Quickee” or “PickMe Foods” by the time you go home without having to physically visit the shop. “The introduction of our latest payment innovation, ‘JustPay’ as a single click payment mode, has become a major facilitator for such retail businesses in Sri Lanka.” states Mr. de Silva. This payment mode intends to convert low-value cash based transactions in the retail space into electronic mode by using Smart Mobile devices.
“We have already seen a staggering growth since January of last year when the first Smartphone based app UPay went live with the payment mode JustPay. Since then a number of other innovative apps have gone live on JustPay, such as DirectPay, OrelPay, Dialog Genie, Sampath PayApp and Solo etc. While Dialog eZ Cash, Mobitel mCash and FriMi are using JustPay payment mode to top up their payment Wallets.” expresses Mr. de Silva enthusiastically. Several more apps are at the verge of going live with JustPay to add to the already impressive lineup. Customers of Bank of Ceylon, Commercial bank, Sampath bank, People’s Bank, Cargills bank, NTB, HNB, NSB, PABC, LOFC and Commercial Leasing & Finance are already using the above apps that are currently live. For the past year, JustPay transaction volume grew by almost 50% month-on-month while the customer registrations grew by 20% month-on-month during the same period to indicate the massive potential for this payment mode in the market. JustPay is now the de facto avenue for the local FinTech companies to enter into the financial services market and we see a great uptake by Gen Z customers due to its inherent convenience.
“We have observed how apps such as Venmo and Zelle dominating the global peer-to-peer payment market and Gen Z has been in the forefront of driving the adoption of these payment apps.” comments Mr. de Silva. However, in a local context, a fund transfer still requires a customer to provide a considerable amount of details about the intended receiver of the payment including their bank name, branch code and account number etc. Gen Z considers this cumbersome and naturally shy away as they do not want to go through multiple steps and enter a lot of information just to make a payment. Mr. de Silva suggests, “We must make their life easier by making things simpler and absolutely convenient. Hence, we have implemented a centralized system to simplify the payment process where the account holder’s bank would be responsible to issue a “nickname”, named appropriately as Payment Exchange Name (PEN), to each of their authorized bank accounts. A customer merely needs to know the payment receivers mobile number and the PEN of the bank account to transfer the funds via his Smart mobile device. We feel that PEN is going to absolutely revolutionize the, currently almost negligible, peer-to-peer payments ecosystem in Sri Lanka.” he opined.
Friction hinders adoption
As natural users of the Internet, Gen Z expects their daily financial transactions to be frictionless at all times. They will look for financial service providers who can fit into their digital lifestyles and think far less in terms of the bank or the financial company down the street. The current frictions experienced at the customer touch-point of making a payment has resulted in a majority of the population from not moving into electronic payments and continuing to use cash. By introducing Near Field Communication (NFC) based tap-and-go payment option, banks and financial sector is trying to reduce the checkout time by several seconds. However, a person has to wait many minutes in the queue before getting to the cashier to make a payment. Reducing few seconds off making the payment does not solve the problem for Gen Z without resolving the bigger problem of reducing waiting time in the queue. Banks in many instances blindly try to provide the wrong solution without addressing the actual problem faced by Gen Z.
When Gen Z customers want to make card payments, a POS device is required to be present at the merchant’s end. However, it is cost prohibitive for a smalltime merchant to obtain and operate a POS device. This is when friction arises. Elaborating a possible solution to this Mr. de Silva states “We are in the process of implementing the Lanka QR code standard of Central Bank at the merchants end. All a merchant would require is a Lanka QR code sticker pasted at his shop to accept an electronic payment and a low cost mobile device (feature phone) to receive a SMS to notify the receipt of payment”. On the other hand, a very small merchant will only have a personal bank account and Gen Z could simply make a peer-to-peer payment using the merchant’s PEN. All a consumer needs to do is to scan smalltime merchant’s PEN to make a payment. Even a king coconut seller would also be able to join the system with a simple PEN and a feature phone. This is going to make things extremely simple for Gen Z to make payments and this will revolutionize the entire payment landscape in the country. “When we make payments so seamless, we anticipate that Gen Z will opt to pay a small-scale grocery shop, corner laundry outlet or even a small hopper shop via a Smart phone in the near future.” concludes Mr. de Silva.