If you spend any time at all on social media, you have likely been the target of advertisements and as a result, they have almost certainly had an impact on your spending habits. The data agrees, with studies showing that 43% of Gen Z consumers have made a purchase via social media, and nearly 60% have discovered new brands through social media platforms.
One way in which this phenomenon can be explained further is through affiliate marketing. A substantial portion of Gen Z social media users (close to 57% according to some surveys) are in some way influenced by content creators when making purchasing decisions. This is higher than any other generation, with millennials generally preferring more conventional advertising. The preference for influencer marketing could potentially be explained by a level of trust that some Gen Z consumers may have for a person over a firm. Many influencers who hold prominence in a certain field (fashion, technology, food, etc.) cultivate a level of trust with their followers that brands simply cannot achieve. Influencers can be seen as a reliable source of information, whereas brands are generally approached with more suspicion. Because of Gen Z’s reliance on online shopping, data shows that they make more deliberate choices than others when it comes to consuming online. Oftentimes, these influencers portray a product as a lifestyle choice, perhaps relating to one that they themselves idealize through their content online, which can subsequently lead to the reverence of particular goods, elevating them from a ‘want’ to a ‘need’ in the eyes of consumers.
Trends on social media platforms like TikTok and Instagram have also altered the spending habits of young consumers. Ideological movements (related to politics, climate change, etc.) and the explosive popularity of certain products online (clothing, Stanley cups, makeup) both affect Gen Z spending. According to Barclays and research from First Insight, 72% of Gen Z are likely to make purchases based on personal, social, and environmental values. Additionally, data shows that Gen Z are more conscientious shoppers, often opting to purchase second hand items and consult different websites in order to find the best deal on a particular item. Some people believe that the rise in ‘thrifting’ and second hand shopping can lead to overconsumption due to the many ‘bargains’ to be found, which can lead to a costly shopping habit over time.
When it comes to general financial literacy, Gen Z also prefers learning about money online. According to a poll, 28% of Gen Z educate themselves on personal finance through social media, 4% higher than Millennials, who came in at 24%. The same survey also reported that Gen Z’ers are more educated on personal finances than any other generation, with 22% of Gen Z opting not to consult any outside resources for education on personal finance, compared to 23% of millennials and 36% of boomers.
Ultimately, social media and online marketing play a pivotal role in the consumption of Generation Z. Some criticise the role of influencers on shaping Gen Z’s spending habits, but the data clearly suggests that they tend to be more financially literate and conscious about their consumption than past generations. This could be due to more accessible educational resources on financial literacy, or the financial constraints that younger shoppers tend to face. It is difficult to say if Generation Z has better or worse spending habits than their predecessors–as younger people begin to earn more and subsequently consume at higher rates, I believe that we will gain further insight into how thrifty or conscious Gen Z actually turns out to be.
