Lululemon, Nike, or TJ Maxx may be good investments if you’re looking to play into Gen Z shoppers long-term, one analyst said.For 23-year-old Maggie Komes, social media is a tool to shop and share the latest trends.Her TikTok page features her latest “hauls” or outfit finds from Abercrombie & Fitch ( ANF ), Amazon ( AMZN ), Gap ( GPS ), and Target ( TGT ), among others.”I find myself being so easily influenced from other people’s videos, and it makes me feel more justified in my purchases,” Komes, who works in social media marketing, told Yahoo Finance.Komes is part of the generation retailers are eager to tap into.Gen Z , generally defined as those born after 1997, has become a powerful demographic with over $360 billion in purchasing power as of 2021, according to Bloomberg .”They are the ones that are setting cultural touchstones,” Hitha Herzog , H Squared Research chief retail analyst, told Yahoo Finance.”They are the ones that talk about and share trends and they are the one that creates a buzz and with that sort of force, and it’s almost like built-in marketing.
Once you get the interest of that younger generation, that is what is going to kind of create that tsunami of business.” Social media plays a large role in product discovery for younger shoppers.And once a certain item takes off, young people are inclined to buy.A recent survey from Charles Schwab of 880 Americans found that 55% of Gen Z respondents said they made purchases based on what they saw friends and other influencers share on social media.Millennials’ purchases were also influenced by social media (at 46%) followed by Gen X (27%) and baby boomers (10%).Yet, young people who just started working have less disposable income to spend.A survey from GoBankingRates that polled 1,000 adults revealed that about 61% of young adults 18 to 24 have $1,000 or less in their savings, while 31% have $100 or less.
So how do they have the spending power? According to Herzog, it depends.”There’s a lot of factors, but a lot of this generation is probably living at home still or living in situations where they don’t have a lot of overhead costs to have to pay for,” she said.
“A lot of that disposable income is going towards buying merchandise.” Gaining young shoppers is ‘an evergreen opportunity’ Retailers are hoping this age group drums up sales.Nordstrom ( JWN ) president Peter E.Nordstrom called younger consumers “a bit of an evergreen opportunity” on a recent call with investors .”We need to do better with the younger customer, and we have plans to do that,” Nordstrom said.”I think our own label programs are going to be a big part of that.
I wish we could flip the switch and change that overnight.” For Abercrombie & Fitch ( ANF ), it’s all about developing a loyal customer.The retailer once known for its loud music, “fierce” cologne smell, and models at the entrance has turned its focus on those in their 20s.”When we target a consumer from our marketing and our design perspective and our merchants is a young millennial, so mid-to-late 20s,” Abercrombie & Fitch CEO Fran Horowitz told Yahoo Finance .”Perhaps they start shopping with us in their 20s.
They’re still here in their 30s and in their 40s.” Kohl’s ( KSS ) is also finding ways to attract a younger crowd.CEO Tom Kingsbury told investors the addition of Sephora inside locations is a driver of the business since young people are flocking to it.”The Sephora business has been incredibly good,” Kingsbury said, adding that locations with a Sephora made more sales.”It’s pretty remarkable….
It’s bringing in a younger, more diverse consumer as well.But it’s been really a driver, and we’re moving right along.” Kohl’s, which has struggled in recent years , is now tasked with getting shoppers who come for Charlotte Tilbury or Rare Beauty cosmetics to shop further into the stores.Kingsbury added the retailer sees an opportunity to expand the young women’s business as well as home decor and gifting.Even Forever 21, once a go-to for tweens and teens at the mall, teamed up with e-commerce giant Shein, which is known for drawing young consumers with its cheap prices.How can investors can play this? For investors with a longer horizon who want to tap into this theme, Barclays consumer discretionary analyst Adrienne Yih shared the retail stocks she is keeping a close eye on over the next six months and beyond.
Want to jump on a brand that is gaining social media hype with innovation and new products? Look into Lululemon ( LULU ) or Nike ( NKE ), Yih said.
Lululemon has “comfortable, innovative newness that they’re bringing to the consumer, and they’re marketing that to these younger consumers, specifically,” Piper Sandler analyst Abbie Zvejnieks told Yahoo Finance on Friday.”It’s why I think they’re positioned well for back-to-school.We’re seeing a lot of social media marketing, leveraging those TikTok influencers.” For brands that are stretching the dollar or easing wallet pressure with Gen Z, Barclays thinks off-price retailers are the way to play it, such as TJ Maxx ( TJX ) or Ross Stores ( ROST ).And if you’re looking to get into companies that tap into secular lifestyle trends like health and wellness, activewear, and beauty, think about Dick’s Sporting Goods ( DKS ), Lululemon, Ulta ( ULTA ), or Nike.
Yet, according to Herzog, the push to connect with younger consumers is playing out at retailers across the board.”That is the demographic that everyone wants to get in with,” Herzog said.
“If you are selling power tools or if you are selling makeup, it doesn’t matter….That is the generation.” — Brooke DiPalma is a reporter for Yahoo Finance.Follow her on Twitter at @ BrookeDiPalma or email her at [email protected] the latest financial and business news from Yahoo Finance.
