Why Gen Z Is the Future of Ecommerce
Wondering how to appeal to Gen Z consumers? You’re not alone. This generation of ecommerce shoppers is tech-native and trend-conscious. The way they shop is unique and, potentially, a departure from their elders. That means ecommerce businesses need to understand these customers, their behaviors, and how they factor their shopping experience into purchase decisions.
In particular, online businesses need to be aware of Gen Z expectations when they shop. These customers can be quite loyal, but their trust is just as easily broken with fraud and false declines.
Let’s take a closer look at this important customer group.
Gen Z Have Distinct Shopping Habits
Compared to their elders, Gen Z shoppers are an optimistic demographic. They understand well that the cost of things is increasing, but that isn’t stopping them from shopping online. In fact, Gen Z is expected to drive future revenue for businesses. According to Afterpay’s Report, “Beyond the Crocs & TikToks. How Gen Z are shopping. U.S. Edition,” Gen Z is expected to account for 52% of global online spending by 2030.
What Gen Z is buying
ClearSale recently published our third-annual Consumer Attitudes study and found that generational differences are more prevalent than ever – especially when it comes to Gen Z. The three top online industries garnering Gen Z purchases are:
Other factors that impact Gen Z online shopping from our study make it clear that price and customer experience are top motivators for this demographic:
- 75% of Gen Z research online to find the lowest price.
- 76% are more likely to shop on sites and apps with advanced search and filtering options.
- 74% prefer to use a site’s live chat over talking on the phone to customer support.
Payment options are important
Multiple sources report that ecommerce businesses must offer a range of payment options to keep this generation engaged:
- 20% of Gen Z have abandoned a purchase because their preferred payment method was not available. (Afterpay)
- Our original research found that 82% of Gen Z shoppers prefer digital wallets as a payment option.
- 44% of Gen Z prefer and utilize buy now, pay later. (Afterpay)
- 65% of Gen Z say they will abandon an online checkout if their preferred payment method isn’t available. (Forbes)
Gen Z is brand-loyal — with a catch
Gen Z is socially minded and forward-thinking. They consider the long-term impact of their purchases on the environment, social justice and ethics. According to Afterpay, one-third of Gen Z consumers have abandoned a brand based on their reputation for sustainability and ethics.
Gen Z shoppers differ from older generations in that they prefer to shop directly from brands — whether that’s on their websites, smartphone apps or social media platforms.
Gen Z Prefers Online Shopping
In our original research, we found that Gen Z consumers shop online considerably more than their elders. Over 50% of Gen Z shop online three or more times per month. In contrast, 59% of Gen X and baby boomers said they shop online only once or twice per month.
It makes sense, given that Gen Z has grown up in the digital age. Online stores and social platforms are native to them. However, why Gen Z prefers shopping online is particularly interesting. Unlike millennials and Gen X, who shop online because it’s available 24/7, Gen Z prefers online shopping because it’s easier to find what they’re looking for, including new trends. And Gen Z enjoys the personalized experiences they get online.
Gen Z consumers are inherently social
As the first generation to grow up with smartphones, it follows that Gen Z consumers are avid social media users. They use this channel to stay connected, build their identity and find shopping inspiration. They also shop — 83% of Gen Z makes purchases on social media.
What is interesting about this younger generation is how savvy they are. Unlike many of their older counterparts, Gen Z generally has a realistic view of what they see on social media. Nearly half are concerned about their data being sold online, and 33% are skeptical of influencers’ authenticity.
Don’t forget about voice commerce
Another channel to explore for ecommerce businesses is voice commerce. Just over half of Gen Z consumers used voice platforms like Amazon’s Alexa, Apple’s Siri and Google Assistant to make purchases in 2023.
Gen Z and False Declines
If there’s one thing online businesses shouldn’t do to their Gen Z customers, it’s declining their orders.
False declines — or “false positives” — happen when a customer’s valid order is declined because the business mistakes it as fraudulent. About 58% of declined transactions are actually legitimate orders.
Unfortunately, false declines are quite common among Gen Z shoppers, according to our research: In 2022, 42% of Gen Z experienced a decline of at least one online order, compared to 33% of millennials, 24% of Gen X and 15% of baby boomer customers.
How Gen Z reacts to false declines
When Gen Z customers experience false declines, their reactions are mixed, according to our 2022 Consumer Behavior Survey data:
- 72% of Gen Z consumers will attempt to make their purchase again.
- 68% will reach out to customer support in an effort to resolve the issue.
But not every Gen Z customer will be so understanding.
- 43% of Gen Z consumers will never shop with your store again after experiencing just one false decline.
- 41% will take their complaint to social media.
That’s where false declines can get expensive.
False declines are costly
Think about the Gen Z customer who won’t re-attempt to make their purchase and will never shop on a site again. That customer has a lifetime value for a business.
Let’s say they spend an average of $100 per month online. A false decline doesn’t just cost $100. That customer, alone, costs the company $1,200 each year, for every year they would have been shopping.
A Gen Z customer likely will be shopping for another 50 years, multiplied by that $1,200. That’s up to $60,000 the company will never see.
To make matters even worse, when that customer tells their friends and/or posts on social media, the business is now at risk of losing the lifetime value of even more customers.
That’s why a safe assumption is that every $1 in false declines equals a loss of $13.
What can ecommerce businesses do?
How to Reduce False Declines
To avoid driving away Gen Z customers, make sure your company has a solid strategy to prevent false declines. At ClearSale, we have developed a global lens and large database that allows us to help clients approve more orders, faster.
Our insight into fraud patterns and trends comes from working with businesses around the world in some of the most high-risk regions. We maintain a massive transaction database that is constantly learning as more orders are processed, and we can see the impact fraud has on diverse markets. This makes it easier for us to identify fraud trends as soon as they emerge and then use those insights to make more accurate decisions.
All transactions are screened using artificial intelligence and machine learning to process transactions and fine-tune fraud models based on customer behavior. Transactions that pass with flying colors are automatically approved, and questionable or suspicious transactions are flagged for further review.
Contextual fraud review
Our data scientists and fraud analysts can help with secondary reviews of potentially fraudulent orders. They use their expertise and understanding of fraud trends — while sharing that information with your team — to determine if a transaction is valid or not. And, if a company so chooses, our analysts can pleasantly and very diplomatically reach out directly to customers to confirm they made the purchase —all the while, training your team to do the same.
Machine learning/AI can also be used post-processing to validate decisions and help find patterns to be aware of moving forward. For instance, our auditing program offers a safe, test environment where we analyze random sets of declined transactions to see what would have happened if we had approved the orders. This enables us to measure the accuracy of our client’s automated rules and fine-tune them as needed.
Contact us today to learn more about how ClearSale helps businesses maximize revenue through fraud prevention.