Getting Inside Generation Z’s Mind: What They Really Want 

Investment banking company Piper Sandler #PIPR has completed a comprehensive six-month study known as Taking Stock With Teens. This study involved teenagers with an average age of 15.7 years and focused on assessing their discretionary spending behaviors and preferences in fashion, technology, brands, and media across a range of geographically diverse high schools in the United States. Over the course of 22 years, since the project’s inception, Piper Sandler has surveyed approximately 250,000 teenagers and accumulated a vast dataset comprising more than 60.7 million data points pertaining to their spending habits. Before delving into the specific findings and figures of the companies, it’s crucial to highlight two key observations: 1. There are discernible early indications of a deceleration in the growth of teen spending; 2. Inflation—among political and social matters—emerged as a prominent concern among teens, securing the second position with a noteworthy 9% of responses, following closely behind environmental issues.

Fall’s Key Results

Teenagers’ spending has seen a 4% decline since the spring of this year, amounting to $2,316. It’s worth noting that this decline is the first observed since the onset of the COVID-19 pandemic.

In the realm of cosmetics, e.l.f. Beauty (#ELF, with a year-to-date increase of 88%) continues to shine as the top beauty brand. It has gained an impressive 13 points year-over-year, now commanding a 29% share among teen girls.

NIKE remains unwavering in its status as the number one favorite brand among teens, excelling in both clothing and footwear categories. It holds a 35% share for clothing and 61% for footwear.

A family-owned fast-food restaurant chain Chick-fil-A continues to reign supreme as the number one choice for teens, securing a 16% share. It is closely followed by Starbucks (#SBUX) at 13% and McDonald’s (#MCD) at 9%.

Among boys, spending growth is primarily driven by top-selling brands for teens, including NIKE #NKE, Lululemon Athletica #LULU, and American Eagle Outfitters #AEO.

Spending by girls has seen a notable 7% year-over-year decrease, with clothing dropping by 9% and shoes by 5%. However, this was offset by increased spending on accessories, showing an 8% boost.

The primary “beauty wallet,” encompassing cosmetics, skincare, and perfumes, averages at $324 annually, with make-up and skincare products taking the lead and enjoying a significant 33% year-over-year growth. Sephora, now owned by Moët Hennessy Louis Vuitton (LVMH) ➵ has seen remarkable expansion, surpassing Ulta Beauty (#ULTA) to become the most favored beauty shop, boasting a 67% rate of repeat customers.

The iPhone maintains its dominance, with 87% of teenagers being iPhone owners. An even higher percentage, 88%, expect the iPhone to be their next mobile device. TikTok’s popularity has surged by 80 basis points compared to the spring of this year, securing its place as the most favored social platform among teenagers. Snapchat (#SNAP) takes second place, with Instagram (part of Meta #META) rounding out the top three.

The share of video games in teenagers’ spending has dropped to 11%, compared to 12% in the fall of 2022. It’s worth noting that 33% of teenagers anticipate purchasing a next-gen console within the next two years.

In the meantime…

⮎ The unmistakable trend of increasing late-night gatherings among Generation Z has prompted several top fast-food restaurants to adjust their hours of operation. This week, Pizza Hut (a part of Yum! Brands #YUM) and Chipotle Mexican Grill #CMG announced significant extensions in their opening hours. Pizza Hut is expanding its hours of operation, with thousands of locations now serving customers until midnight, and some even staying open until 2 a.m. On the other hand, Chipotle is catering to the night owls by extending its hours to midnight at 53 restaurants on college campuses as part of the annual “Boorito” promotion, just in time for Halloween. Chipotle made this decision based on its own survey results, which found that more than 80% of customers between the ages of 18 and 26 expressed a desire for pizzerias to remain open until midnight. It’s worth noting that over the past two years, Chipotle has seen a 30% increase in late-night business after 8 p.m. on Halloween. Yum! Brands has also embraced late-night dining, with both KFC and Taco Bell offering extended hours in various regions. Among these, Taco Bell stands out as a leading player in the United States, reporting robust late-night sales in the previous quarter.

⮎ The Piper Sandler survey did not place any Yum! Brands restaurants among the top preferences for teenagers. However, it’s important to note that Chipotle has had a long-standing fan base within Generation Z, although it has faced growing competition from McDonald’s and Chick-fil-A. This fall, Chipotle ranked as the fourth most popular restaurant among teens, a slight decline from its third-place position in the spring. The increase in McDonald’s popularity among young people may reflect shifting consumer habits influenced by the possibility of a recession. It’s worth considering that in 2022, McDonald’s managed to gain market share from Chipotle, partly due to the latter’s decision to raise prices by an average of 8%.

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