New research reveals consumer spend has exceeded pre-Covid levels
As summer finishes but Covid-19 lingers, the US retail landscape is looking better than expected. Consumers have seized the chance to replenish their wardrobes and revamp their homes after 18 months in lockdown – and Millennials and Gen Zs are leading the charge.
In fact, according a new report from Accenture Strategy and Afterpay, retail spend by these two key groups is now more than 10 per cent above pre-Covid levels.
The Next Gen Index, which explores how consumers are spending and what they’re buying, also shows the popularity of BNPL is surging among Gen Z, up 330 per cent since January 2020.
“Since restrictions started to lift back in January, consumer confidence has improved and jobs growth has picked up,” says consultant Atharva Karandikar of Accenture Strategy. “These macro trends are really helping retail.”
Here are some of the top insights from Afterpay’s second Next Gen Index report into consumer spending:
Shoppers aged under 40 are becoming an increasingly powerful force in the economy. Currently, Gen Z and Millennials account for 32 per cent of the total retail spend in the US.
However, that’s predicted to grow to 48 per cent by 2030 as more Gen Z (currently aged 9-24) enter the workforce.
From a low in March 2020, spending has recovered from pre-pandemic levels – and has bounced back faster among younger generations. Gen Z and Millennial spend is up 14 and 12 per cent respectively on the period before Covid-19 hit.
Gen Z accounts for 14 per cent of spending on Afterpay, but it’s the fastest-growing cohort, with spending increasing by 400 per cent in the past 18 months.
“This reflects their increasing confidence, as they’ve been able to resume employment and socialising,” says Karandikar.
Fashion still dominates purchasing using Afterpay: it accounts for 80 per cent of Gen Z spend and 70 per cent of Millennial spend.
However, these younger generations are displaying increasing interest in buying for their homes and spending on recreation such as books, electronics and games. Home and recreation is the fastest growing category among Gen Z and Millennials; although it only makes up 4 per cent and 7 per cent of Gen Z and Millennial spending, it’s growing above 150 per cent year-on-year.
Gen Z and Millennials account for almost two-thirds of spending through Afterpay on small and medium-sized businesses.
What’s more, their spending on small business is increasing. Since January 2020, consumer spend has increased by more than 260 per cent for Gen Z and 180 per cent for Millennials.
BNPL is in the early stages of market penetration in the US, says Karandikar, but it is growing fast. BNPL payments have risen 230 per cent since January 2020 – and while Millennials remain the biggest users of BNPL, Gen Z is catching up.
“Given the high rates of interest on credit cards, BNPL is a good option for these consumers,” adds Karandikar.
Offer a seamless omnichannel experience
Gen Z and Millennial consumers appreciate value for money, says Karandikar – a purchasing consideration that’s going to be even more pronounced as we emerge into the post-pandemic world.
“They will research products online before going in store, and vice versa, which means merchants who can offer a seamless omnichannel experience will be well-placed to take advantage of the boom that will come once lockdowns end.”
Ensure customers know you offer Afterpay
Millennials were the first to use BNPL, but now Gen Z and older generations are jumping onboard. “Gen X and older aren’t necessarily driven by budgetary constraints, but a large payment seems psychologically easier to manage when it’s split into four payments,” says Karandikar. He adds that highlighting the Afterpay cost is an important sales driver.
Buy Now, Pay Later options are hugely popular in the lead up to the holiday season because they help customers get what they need when they want. Ensure your customers know you offer Afterpay by promoting it across your channels, including social media, emails and website. Letting shoppers know they can split payments with Afterpay can help increase conversion rates and average order value – that’s why we recommend you include it where possible.