Gen Z more likely to make purchases based on social media: Survey

A recent survey from Charles Schwab shows more U.S. consumers are using social media to make purchasing decisions. The biggest group is Gen Z, of which 55% said they make shopping decisions based on what they see from social media posts. Yahoo Finance Reporter Brooke DiPalma explains that using social media to attract Gen Z customers has been a significant strategy for retailers. DiPalma says retailers such as Abercrombie & Fitch (ANF), Kohl’s (KSS), and Nordstrom (JWN) have all said they are making a push to attract younger shoppers. Retailers continue to want to attract Gen Z because they are “setting the trends” according to Dipalma, who notes that older generations tend to then pick up on those trends.

Video Transcript

BRAD SMITH: Social media has a big impact on shopping decisions, according to a recent survey from Charles Schwab. More than half of Gen Z respondents say they made purchases based on what they saw friends and other influencers share on social media. So now retailers are looking to tap into those Gen Z shoppers to drive business. Yahoo Finance's Brooke DiPalma is here with the details. Hey, Brooke.

BROOKE DIPALMA: Good morning, Brad. That's right. All retailers want young people. They want them in the stores, they want them to shop online, and they want them to then share their favorites on social media in what many users are calling hauls. Now, one TikTok user that I spoke to, she works in social media marketing. Her name's is Maggie, and she's shared many hauls, from Abercrombie and Fitch hauls to Amazon to Gap to Target hauls, among so many others, and she said that she finds herself so easily influenced from other people's videos, and it makes her feel more justified in her purchasing decisions.

Now, retailers certainly looking to tap into that and tap into this generation when they look to spend back to school or just in general as a new season approaches. So forget the loud music, forget the fierce cologne smell, and models at that Abercrombie and Fitch entrance. The CEO telling Yahoo Finance that they hope that they develop loyal customers in their mid to late 20s, especially young millennials that they hope stick around in their 30s and then 40s.

In addition to that, we heard from other retailers this past earnings season about the potential that young consumers have. Kohl's, which has struggled in recent years, is now getting a boost in sales as well as foot traffic, saying that their Sephora business, which is located inside the stores, attracts a younger, more diverse crowd that they're hoping to bring in further into the stores. And another one that mentioned consumers, or young consumers, on their call is Nordstrom. They said that it's a bit of a evergreen opportunity, but they said, we do need to do better when it comes to young consumers.

And so why do they want this young consumer when they actually have the least amount of savings in their households? Well, they're setting the trends. That's according to one analyst. They said that really, these young people, as we've heard in many years before just now, they felt these cultural touchstones that older generations then pick up on, and now thanks to social media, like we saw before, like these hauls, just one item, if it goes viral, it has the potential to create a tsunami of business not just for these big box retailers, but we've seen small businesses really take off on social media as well.

And in addition to that, it really does depend on the situation of a young consumer, but many people in their young 20s don't have a lot of overhead costs, and a lot of them have disposable income that is then going towards buying merchandise, and so it really looks like here Gen Z has the power when it comes to retailers.

RACHELLE AKUFFO: It's true, because, I mean, I'm certainly seeing more-- whether I'm shopping online or in-store, seeing these As Seen on TikTok or I've seen on Instagram things popping up, and they just go flying off the shelves. So then if you're an investor then, how should you be thinking about this?

BROOKE DIPALMA: Yeah, well, one conversation that we continue to see come up or one stock that we continue to see come up is Lululemon. Of course, they came out with earnings yesterday afternoon, but they're really getting lots of attention from young consumers, and one Barclays analyst that I spoke to said that if you want to jump on a brand that is gaining that social media hype with innovation and new products, you want to think Lululemon.

In addition to that, you also want to think Nike. They continue to make strides with young consumers, as well as continuing to diversify their portfolio to meet what's next. Now, if you want to jump into brands that adhere to health and wellness, active lifestyles, you're going to want to think those are on the screen. Think Dick's Sporting Goods, think Lululemon, think Nike, also think Ulta as well.

And one more for you, if you want to lean into brands, or invest in brands rather, that are really looking to help Gen Z stretch the dollar as their wallets remain pinched, we want to think of those off-price discount retailers. So we're going to think TJ Maxx as well as Ross Stores. So there's lots of ways to invest in this perhaps newfound behavior of young consumers, but lots of businesses to follow as well.

RACHELLE AKUFFO: Appreciate that update, Brooke, there for us. Thank you so much.