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As they ease into the post-pandemic normal and navigate inflationary pressures, consumers’ approach to shopping and their preferences have changed. As businesses grapple with the same environment, understanding consumer needs and expectations is critical to making decisions that facilitate long-term business growth.
The 2023 Square x Afterpay State of Retail report took an in-depth look at data from purchases made by millions of shoppers across hundreds of thousands of sellers to help identify today’s most influential consumer spending behaviors and other opportunities to help businesses navigate the changing macroeconomic climate.
Below are five key consumer trends to take into consideration:
Mobile commerce is a must.
Ensuring that your business is mobile-friendly is no longer a nice-to-have — for more reasons than one. According to the Square x Afterpay State of Retail report, two in three Afterpay online transactions from millennials and Gen Zers were made on mobile in the past year. With social commerce continuing to drive mobile transactions — 95% of Gen Zers and 94% of millenials use their phones to shop — it’s important to place your business directly where your shoppers are.
Square has integrations with Meta that make it easy to reach customers on multiple platforms and seamlessly sync your product catalog so your customers can easily browse your store and follow up with any questions on the go.
In addition to shopping on mobile, customers also want to use their devices to communicate with businesses, especially when they’re searching for support. More than 84 million messages have been sent between sellers and buyers through Square Messages with conversations ranging from how to pick up an order to the cost of services. Between the continued rise of mobile commerce and the growing appetite for shoppers to be able to easily communicate with brands with ease, it’s crucial that businesses expand their selling channels.
Buy now, pay later attracts shoppers.
Everyone loves flexibility. Flexible payment options like Afterpay may have a strong hold over younger consumers, but they’re not the only ones who harness its power. Over the last year, Afterpay orders by Gen X and baby boomers increased by 16% and 12%, respectively. Use of buy now, pay later (BNPL) options has steadily increased over the past five years, topping $3 billion in sales in 2022.
Implementing a BNPL offering can help make your business more attractive to shoppers and incentivize them to spend more, increasing sales and positively impacting customer loyalty. Square sellers can easily accept Afterpay in-store and via Square Online. Don’t forget to let your customers know about your new BNPL option with Square Marketing. Combining the announcement with an irresistible sale or the launch of a new product could also work to make shoppers more eager to browse your products and spend more.
Sustainability matters to conscious consumers.
It’s no secret that consumers want to shop with brands that reflect their values. Whether it’s inclusivity or sustainability, shoppers need to feel connected with the places they shop and be able to see themselves in the brands they frequent. Sustainability is a significant concern for younger consumers, with Gen Zers and millennials currently making up the majority of sustainable product sales at 69% share of spend, according to the report. Gen Zers, however, are leading the way as they account for over 70% of sales for products marked as sustainable on Afterpay.
Take into account the different ways your store can appeal to the conscious consumer without making it feel forced or performative. Younger generations are not only more conscious than the ones before them, but they are also more aware. When it comes to investing in sustainable packaging, materials, or processes, make sure it feels natural to your brand and shows up throughout the business. Consider getting up and running with the secondhand market or discovering other ways to recycle unused clothes to cut back on waste.
Luxury is relevant for millennials and Gen Zers.
If you’ve ever wondered how high-end or luxury businesses fare when it comes to younger generations, you might be surprised to know that it’s growing. While there’s been a slight drop in millennials’ share of spend on luxury items — from 56% to 45% — over the past few years, there’s been growth in this area as it relates to Gen Z. This generation’s share of spend is 16%, up from 13% in 2019.
While these shifts can be attributed to factors such as disposable income, it’s also important to note the impact of the return to office, pushing shoppers to purchase sophisticated staple items. In fact, Square data shows a yearly increase in workwear items such as dress shirts (+19%) and overszied blazers (+44%).
“The rise of social media has caused a shift from generation ‘we’ to generation ‘me,’ which has been positively correlated with a rise in narcissism. A recent study conducted on young consumers in the U.S. and China revealed that covert narcissists gravitate to quiet luxury goods for hedonistic reasons to treat and feel good about themselves rather than to signal any kind of status.” ”
Shakaila Forbes-Bell → ’Fashion
Luxury brands interested in reaching Gen Zers should take the time to understand the audience and how their brand can fit into their world. As a generation that’s native to the digital age, it’s imperative that businesses speak their language and reach them where they are. Offering flexible payment options, re-evaluating their marketing channels, expanding their selling channels, and more can go a long way toward helping businesses stand out to this group.
Customers want more from their shopping experience.
Now more than ever, businesses have to remain competitive in order to stay attractive to customers. One of the main ways businesses can do this is by offering more — and they are.
For instance, the Square x Afterpay State of Retail report found that the hiring growth of baristas, servers, and bartenders at retail locations has outpaced overall hiring growth by 8x. This push towards adding bars and breweries into restaurants is a sure way to elevate the customer experience. Once customers shop until they drop, creating the opportunity for them to grab a quick drink afterward offers a layered experience and keeps customers in your store.
Adding a bar or brewery could also invite new shoppers into your store. For customers simply looking to grab a drink on their way to their next destination, your store becomes a viable option. Even if they’re not interested in your other products right away, diversifying revenue streams creates more awareness for your brand and helps keep money flowing into your business, keeping your store afloat.
For businesses interested in adding new facets to their experience, you might also consider services. Spending on services such as health spas, music and entertainment, and culture and recreation are trending higher than the retail average, with health spas, in particular, seeing over 150% growth in sales in 2022, according to the report. For retail brands, creative pop-up shops or other immersive experiences that lean into one of the three categories above could be a strong way to get more experiential and bring in customers.
The retail industry is constantly evolving and it’s important that retailers evolve with it. Whether it’s embracing new payment options or discovering ways to appeal to the next generation, staying on top of blossoming trends and growing shifts can help future-proof your business and keep you one step ahead of competitors. To learn more about the state of the retail industry, view the full Square x Afterpay report.
