They are the first digitally native generation, born into a world of smartphones, social media and instant messaging. Their generational forebears, the Millennials, may have pioneered the mobile revolution, but these post-Millennials have never known anything else.
Meet Generation Z, the next big retail disrupter.
Generation Z — generally defined as those born after 1995 — now make up one quarter of the U.S. population. By 2020, they will account for 40% of all consumers. They hold more than $44 billion in buying power worldwide, according to the National Retail Federation.
The time is now for retailers to build a technology foundation that allows them to connect with this important demographic and address its unique characteristics. For example:
- Smartphones are the device of choice for 75% of Generation Zers, the NRF says. At the same time, they “expect to move seamlessly between physical and digital worlds and are less tolerant of technical glitches than Millennials.”
- They’re allergic to hard-to-use technology and demand an effortless mobile experience, with 62% reporting in an NRF survey that they refuse to use apps or web sites that are hard to navigate and 60% saying they won’t use apps or sites that are slow to load.
- They want a frictionless interaction that feels heavily personalized and consistent across multiple channels, whether smartphones, tablets, laptops or physically in the store. There’s no one-size-fits all with Generation Zers: According to an Accenture study, a surprising number of them still like to visit stores for a hands-on encounter and then shop for items online to find the lowest price.
- They’re open to new experiences, such as augmented reality on a retail site or voice-activated ordering on a digital assistant such as Amazon Echo or Google Home.
- Last but not least, they have not yet formed strong brand loyalty, which means huge opportunities for retailers that can accommodate their needs and a huge market disadvantage for those that can’t.
As a PwC report put it: “Companies should respond to these new consumer habits by shifting their focus and investments accordingly. That means more attention to smartphone dynamics, as well as investments in AI and store experiences. New business practices to support these investments can help companies go with the flow of new consumer behaviors, rather than fight the current.”
That’s whymany retailers are embracing technologies like cloud computing and open source software that let them adapt quickly to constantly changing customer requirements.
These technologies give e-Commerce companies a scalable architecture for keeping up with the latest innovations — all without a costly and time-consuming overhaul of their entire IT ecosystem.
The on-premise architectures that dominated e-Commerce in the past required exorbitant investment in hardware and software, and were not flexible enough for a world where all consumers, let alone Generation Zers, are using a variety of devices and want the interaction with the retailer to offer the same feel throughout.
With these older systems, it was difficult or impossible to unify disparate data sources, rapidly develop and deploy new apps, and optimize their performance — all prerequisites to appeal to the new breed of customers.
At a time when consumers can switch among competitors with the swipe of a smartphone, more and more retailers understand that agile software development techniques and the cloud have become key differentiators in a crowded market.
By way of example, our two companies recently worked together on a project that significantly boosts the ability of commercetools’ retail customers to create engaging experiences. By migrating to Canonical’s open-source Ubuntu operating system on its 300 servers, commercetools can provide new customer touch points 90% faster than before — enabling much more flexibility and speed for omnichannel brands.
This is helping commercetools evolve its platform to meet the needs of today’s consumers, while reducing the need for the company’s engineers to spend time and effort on its infrastructure.
At a time when Generation Z is once again rewriting the rules for retailers, companies that are clueless about innovation as well as the technology underpinnings to foster it are flirting with business disaster. It’s safe to say those businesses probably won’t be around five years from now.
Generation Z will increasingly change the landscape and, for retailers, that means adapt or die.
Mark Baker is Field Product Manager at Canonical. Prior to Canonical, he worked at MySQL and Red Hat where he enjoyed disrupting large billion dollar incumbent technology companies.
Hajo Eichler is Chief Technology Officer at commercetools, a next-generation software technology company that offers a true cloud-native platform. With 15 years experience in software development, Eichler has seen several startups as well as worked in a research institute that highlights his broad knowledge in order to have a generic way to solve things. Since 2012 he has headed the development of the Commercetools platform, but is also responsible for quality assurance and 24/7 operations.