fbpx

Gen Z, the Ignored Affluent Generation

Many brands and marketers have had little success with Generation Z (“Gen Z”) consumers.  If you were born in the mid- to late-1990s, then you were born during the Gen Z years. Unfortunately, many brands and marketers have dismissed this demographic, unfairly focusing on false generation z negative characteristics. These misperceptions could prove detrimental to brands and marketers since 1/3 of global population is Gen Z, and they control about $360 billion of spending power. Gen Z is the next generation of consumers, yet many brands and marketers ignore them or are having trouble connecting with them. And the brands that have recognized that Gen Z can be customers for decades to come have struggled to win their trust.

Sophic Capital - Logo - Colour

Gen Z is Unlike Any Other Generation

Marketing to Gen Z is not straightforward because they are not easily understood by conventional marketers. This is a demographic that cherishes video communications for their social, educational, and informational needs. Their cameras are always on, streaming their lives as they multi-task through their days. They like emojis, memes, riding social media trends, getting socially active. They like hanging out in “third places” that converge social media with other activities like gaming (Twitch), communities (Discord), photo sharing (Instagram), and self-expression (Tik Tok). Facebook and Twitter? Yuck.         

Brands and marketers need to understand these characteristics in their generation z marketing strategies. Social media influencers play a big role in all aspects of Gen Z lives. Gen Z needs convincing, authenticity, and inclusivity before accepting the messenger or the messenger’s messages. They value human rights, protection of the environment, education for everyone, strict corporate governance, and a just political system that does more for citizens. They deplore racism, sexism, harassment, and genderism.

Once Gen Z trusts someone or something, they remain loyal until that trust is broken. Maintain that trust, and Gen Z will go to those influencers for news, info, entertainment, and brand endorsements. Not all brands understand how important trust, authenticity, and inclusivity are – at a minimum, all 3 are required to get Gen Z to crack open their wallets  (read commentary about Generation z marketing characteristics and the challenges brands faced when targeting Gen Z at esports events).

Business founders are awakening to the importance of community when targeting Gen Z. A 2019 First Round Capital survey uncovered that close to 80% of start-up founders considered building community as crucial to their businesses (Exhibit 1). The reasons for this are that an engaged, loyal and passionate community can generate a word-of-mouth viral, virality, and brand/product fit. They understand that communities are built over time and not fake nameplates. They understand that it’s critical to find people who care and invest in these users while determining how to serve them. They understand that community value is not a singular vector – “community value” is multifaceted relationship building with shared purpose that makes people feel as though they are contributing to a community’s growth, which happens to be a part of a company’s offering.

Exhibit 1: Community is the New Moat

Gen Z Has Tight Wallets

Gen Z matured post the Great Financial Crisis, and many saw the negative impacts to their parents’ careers, finances, and homes. As mature adults, Gen Z now has experienced similar negative outcomes from the COVID-19 pandemic.  They’re seeing fewer quality job opportunities, university diplomas that are not helping to fulfill their dreams, and societal wealth disparity increasing. These factors have increased Gen Z skepticism towards institutional power and legacy processes.

Financially, Gen Z is astute. A 2017 survey found that 12% were saving for retirement 21% had a savings account before the age of ten.  They are also the most digital savvy generation in history, having grown up with smartphones and tablets in hand. They’ve always had instantaneous access to information and entertainment. Yet, today’s financial services weren’t designed for Gen Z.

For example, Gen Z doesn’t understand why they need a passport photo and utility bills to open a bank account.  Nor do they get why a SWIFT transfer takes days or why they even must go to a physical bank branch to initiate that transfer. What they want is a digital currency that transacts seamlessly. They want simplified ways to shop (so long malls/ adiós department stores). And they want to do all of this while helping the planet and humanity.

Sophic Capital - Logo - Colour

Conscious Consumers and Entrepreneurs

Gen Z is the largest global demographic, comprising 32% of the world’s population. They are also the most consciously aware generation to walk the planet. They demand accountability, transparency, trust, and credibility for all relationships. They’re uncompromising when it comes to fairness, good governance, and safeguarding the environment.  For these reasons, many dismiss materialism in lieu of recycling.

Many people don’t realize how big the buy & sell market is. Also know as “recommerce”, “reuse”, “resale”, “thrifting”, and “circular economy”, the buy & sell market is certainly large enough for Facebook, Kijiji, eBay, and Craigslist to create multi-billion-dollar businesses. In fact, the World Resources Institute estimates that consumerism has created $4.5 trillion of waste, an unpleasing fact for Gen Z. But rather than complain, they are taking action and making money while doing it.

Sophic Capital - Logo - Colour

Source: ThreadUp, 2020 Resale Report

Forty percent of Gen Z bought second-hand clothing in 2019, and 80% of this generation attaches no social stigmas to buying recommerced fashion. When money is tight, 90% of Gen Z have or would purchase used clothes.  In fact, Gen Z has helped the second-hand clothing market grow into a $28 billion industry – an industry that could grow 18% annually through 2024

When it comes to cryptocurrency ideal utility, 48% of Gen Z want to conduct financial transactions. This is interesting because a) many cryptos are volatile (some worthless), and b) few enterprises accept cryptos as payment mediums (“a”) is likely a main reason).

Sophic Capital - Logo - Colour

Source: ThreadUp, 2020 Resale Report

Like their Predecessors, Gen Z Students Cuts Costs

University has always been expensive – not only tuition but also housing, books, and transportation (Exhibit 2). Like the generations that came before them, Gen Z students are not immune to the expenses needed to invest in their futures. And like their predecessors, cutting costs is often required to earn a university degree. However, as we mentioned, Gen Z relishes recommerce and does not attach social stigmas to buying second-hand goods.  

Exhibit 2: Average Estimate Fulltime Undergraduate Budgets 2021-2022

Source: CollegeBoard

The “Back-to-School Trade”

Sophic Capital client Mijem (CSE: MJEM) is the convergence of the following Gen Z trends: recommerce and social media. It provides a second-hand buy & sell app targeting university and college students. Plus, it also helps arrange rideshares with other students. Furthermore, Mijem offers Bitcoin SV crypto wallets and rewards to students who transact on the application. Mijem is the first buy & sell community app built specifically for Gen Z.

Canada and the United States has a combined 23 million college students, all waiting to return to campus. Prior to the 2020 COVID-19 pandemic, Mijem had piloted at over 70 North American universities and colleges and had attracted over 39,000 students to the app, each spending 2 to 4 minutes per session. Like many companies did during the pandemic, Mijem minimized marketing efforts, fine tuned its product and is now re-launching post a recent round of financing. Now, with many campuses open, Mijem is revamping its marketing, outreach, and community building efforts to onboard more students.

Mijem’s revenue model parallels that of AirBnB. Per transaction, Mijem takes 12.5% of what the seller earns and nothing from buyers. Mijem then uses about 2% of what’s earned from sellers to fund the purchase of Bitcoin SV for the buyer and seller as a loyalty reward. Future revenue could come from new features and functionality and in-app advertising.

Investors seeking to invest in the largest demographic – Gen Z – and believe that buy & sell is a growing industry that resonates with this generation should consider Sophic Capital’s client Mijem (CSE:MJEM), a company that has fostered online Gen Z university communities through its buy & sell application.

Sophic Capital - Logo - Colour

Source: eBay Recommerce Report, March 2021

Sign up for all Sophic Capital’s reports at https://sophiccapital.com/subscribe/

Disclaimer

The information and recommendations made available through our emails, newsletters, website and press releases (collectively referred to as the “Material”) by Sophic Capital Inc. (“Sophic” or “Company”) is for informational purposes only and shall not be used or construed as an offer to sell or be used as a solicitation of an offer to buy any services or securities. In accessing or consuming the Materials, you hereby acknowledge that any reliance upon any Materials shall be at your sole risk. In particular, none of the information provided in our monthly newsletter and emails or any other Material should be viewed as an invite, and/or induce or encourage any person to make any kind of investment decision. The recommendations and information provided in our Material are not tailored to the needs of particular persons and may not be appropriate for you depending on your financial position or investment goals or needs. You should apply your own judgment in making any use of the information provided in the Company’s Material, especially as the basis for any investment decisions. Securities or other investments referred to in the Materials may not be suitable for you and you should not make any kind of investment decision in relation to them without first obtaining independent investment advice from a qualified and registered investment advisor. You further agree that neither Sophic, its, directors, officers, shareholders, employees, affiliates consultants, and/or clients will be liable for any losses or liabilities that may be occasioned as a result of the information provided in any of the Material. By accessing Sophic’s website and signing up to receive the Company’s monthly newsletter or any other Material, you accept and agree to be bound by and comply with the terms and conditions set out herein. If you do not accept and agree to the terms, you should not use the Company’s website or accept the terms and conditions associated to the newsletter signup. Sophic is not registered as an adviser or dealer under the securities legislation of any jurisdiction of Canada or elsewhere and provides Material on behalf of its clients pursuant to an exemption from the registration requirements that is available in respect of generic advice. In no event will Sophic be responsible or liable to you or any other party for any damages of any kind arising out of or relating to the use of, misuse of and/or inability to use the Company’s website or Material. The information is directed only at persons resident in Canada. The Company’s Material or the information provided in the Material shall not in any form constitute as an offer or solicitation to anyone in the United States of America or any jurisdiction where such offer or solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation. If you choose to access Sophic’s website and/or have signed up to receive the Company’s monthly newsletter or any other Material, you acknowledge that the information in the Material is intended for use by persons resident in Canada only. Sophic is not an investment advisor nor does it maintain any registrations as such, and Material provided by Sophic shall not be used to make investment decisions. Information provided in the Company’s Material is often opinionated and should be considered for information purposes only. No stock exchange or securities regulatory authority anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. Sophic and/or its principals and employees may have positions in the stocks mentioned in the Company’s Material and may trade in the stocks mentioned in the Material. Do not consider buying or selling any stock without conducting your own due diligence and/or without obtaining independent investment advice from a qualified and registered investment advisor. The Company has not independently verified any of the data from third party sources referred to in the Material, including information provided by Sophic clients that are the subject of the report, or ascertained the underlying assumptions relied upon by such sources. The Company does not assume any responsibility for the accuracy or completeness of this information or for any failure by any such other persons to disclose events which may have occurred or may affect the significance or accuracy of any such information.

The Material may contain forward looking information. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible,” “projects,” “plans,” and similar expressions, or statements that events, conditions or results “will,” “may,” “could,” or “should” occur or be achieved or their negatives or other comparable words and include, without limitation, statements regarding, projected revenue, income or earnings or other results of operations, strategy, plans, objectives, goals and targets, plans to increase market share or with respect to anticipated performance compared to competitors, product development and adoption by potential customers. These statements relate to future events and future performance. Forward-looking statements are based on opinions and assumptions as of the date made, and are subject to a variety of risks and other factors that could cause actual events/results to differ materially from these forward looking statements. There can be no assurance that such expectations will prove to be correct; these statements are no guarantee of future performance and involve known and unknown risks, uncertainties and other factors. Sophic provides no assurance as to future results, performance, or achievements and no representations are made that actual results achieved will be as indicated in the forward looking information. Nothing herein can be assumed or predicted, and you are strongly encouraged to learn more and seek independent advice before relying on any information presented.