Gen Z and the Retail Middle Class - with Brandon Rael and Andy Austin

Welcome to the Retail Rundown, your go-to weekly podcast where RETHINK Retail teams up with industry experts to discuss the news and trends defining the world of retail.

Gen Z, the portion of the U.S. population born around 1996 through roughly 2010, makes up for 40 percent of U.S. consumers and by 2026, Generation Z will surpass millennials as the largest consumer base in the U.S.

In this episode, host Brandon Rael of Reach Partners sat down with Andy Austin, president of The Industrious, a global design agency that specializes in creating unique in-store experiences.

Together they discuss how a well-designed, innovative customer experience can be transformative for retailers and the ways in which aligning the customer’s personal brand with the retailer’s brand can engage shoppers and build lasting relationships with the next generation of consumers.

Read the Industrious’ whitepaper: Gen Z and The Retail Middle Class – A Path Forward

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Hosted by Brandon Rael
Written and produced by Gabriella Bock
Edited by Trenton Waller

 

 

TRANSCRIPTION

Brandon Rael:
Hello, and welcome to the Retail Rundown. I’m Brandon Rael, your host for the day. And today I’ll be speaking with Andy Austin, founder and president of The Industrious, a global design agency that specializes in creating unique in-store experiences. I want to thank you, Andy, for joining today.

Andy Austin:
Well, hi Brandon. Thank you for the opportunity to sit down with you and share some thoughts. I’m really excited to connect with your audience today.

Brandon Rael:
Excellent. I think we already have a very topical subject today, so let’s jump into it. So The Industrious recently published a white paper titled, ‘Gen Z and The Retail Middle-class: A Path Forward’, which analyzes the current state of retail and offers advice for how businesses can incorporate advanced experience strategies in their brick and mortar stores. So let’s start there. Andy, can you kick us off with a brief overview of the white paper and some of their key learnings on Gen Z and the retail middle class? How do these two areas of retail connect?

Andy Austin:
Sure. Brandon, I’ve been in retail for over 20 years and we’ve seen a lot here at The Industrious. This is an amazing opportunity because we believe in the power of digital tools to connect people in live spaces. So when you look at the traditional retail and retail middle class, which I’ll define in a second. It used to be, if we could just get them into the door, we’ll get the sale. We’ve got merchandise authority, we’ve got a great product lineup. We’ve designed beautiful stores and a customer journey. And we believe that with Gen Z coming in and what’s happening with the retail middle-class we now have to redefine what makes a retail space successful. And the center of the path forward for these retails is Gen Z. Gen Z is coming and they actively need a compelling reason to visit stores. So you asked about Gen Z.

Andy Austin:
The standard definition for Gen Z  is people born around 2010. They’re just now coming of age, they’re getting they’re spending money and they’re entering the consumer economy. And we all know that Gen Z have had a smartphone in their hand since before they were 10 years old. So when we look at how we need to approach Gen Z, here at The Industrious, it’s the TikTok attention span, right? Gen Z doesn’t need to be patient. Every piece of content they need is available to them in a ubiquitous manner at any moment. So how do we respond to that? And Gen Zers love to gather. They’re a social group. They share opinions maybe much more freely than some other generations would, and they like contact in their physical and online life. And so if you’re entrenched in the middle class of retail, you’ve got a really interesting opportunity here, but you also have unimaginably fierce competition for available shopping [vowels 00:03:08].

Andy Austin:
So let’s talk for a second about the retail middle-class.

Brandon Rael:
Sure.

Andy Austin:
Retail middle-class, we define that as retailers that started their operations before online commerce ever began. And so of course, all of these retailers have taken the time and important dollars to invest in experiential elements, like buy online, pay in-store and other things that support online commerce. But since there are legacy brand elements that go before online commerce, they’ve been most affected by the pandemic. Other things that represent the retail middle-class are things like seller-assisted commerce. So the concept of a shopper leaving the sanctity of her browser and going into a store to have a conversation with a brand advocate, which we might call it salesperson to make her feel smart and get excited about the brand and make her feel that she’s made a good choice to come in and interact with that brand.

Andy Austin:
What’s most important about the retail middle class is that they have attractive real estate portfolios. Stores that have taken generations to build. And those real estate portfolios offer the best advantage to capitalize on face-to-face interaction as shoppers are returning to stores. Another element of the retail middle class is they’re most dependent on retail operations for cash flow. So they’re not necessarily online first. And so even though the economy is returning, they fell furthest behind, but that retail presence is still there and consumers with spending money are coming back. So brands that are like retail middle-class would be Abercrombie and Fitch and Hollister. Those were not shopping at Neiman Marcus or Saks. We’re not shopping at dollar stores. That’s your retail middle class. When you think of jewelry, of course, you could think Tiffany or Van Cleef & Arpels, but your retail middle-class that provides access to products and ubiquitous availability throughout the country is Zales and Kay jewelers.

Andy Austin:
So that’s your retail middle-class. So how does that come together? We need to create this reason for Gen Z to visit stores because their entire life is in there in the palm of their hand. So the overarching reason for Gen Z stores will be to connect retail brands to their personal brand, which we call brand intimacy, in a sharing and collaborative environment. And so what’s so wonderful about retail middle-class is these glorious, ubiquitous real estate portfolios. They give us these live spaces for Gen Z to gather, interact with others, consume and amplify content. And we couldn’t be more excited for these retail real estate portfolios, but what it could mean if we look at them properly and change a little bit about how we evaluate these retail real estate store locations.

Brandon Rael:
That’s some excellent insights there and thank you for all the additional context. Some follow-up questions about that. Number one, we’ve seen the emergence of Gen Z now as a consumer base, but also as a really impactful influencer on their parents and even the millennials. What have you seen in your travels and work with clients where Gen Z has really influenced the marketplace and other generations of following suit? And the second follow-up question is now we’re seeing retailers, the physical spaces now embracing that retail is truly the blending of the arts and sciences of blending experiences plus technology. So can you talk a little bit more about those points?

Andy Austin:
Well, sure. So, to your first question, Brandon, we know that Gen Z is a very politically active group. They don’t see the world with the same constraints as maybe you and I would. And one of the things that’s wonderful about their ability to consume and create content that impacts others, that they influence is that those purpose-driven companies that don’t turn their heads away from issues that are important to Gen Z, are able to provide the content that Gen Z can then amplify. And that affects the parents like you and me, going to those brands and being part of that brand interaction. Gen Z is also a big friend of the environment and humanity. So we know that brands that have practices that are consistent with those values are attractive. And we also know that because of the attention span, Gen Z folks who find that there’s a brand that’s not consistent with that will move on to another competitor.

Andy Austin:
And we know that because of their ability to grab content and consume content, and that leads to maybe less of an attention span, this competition is going to become fierce. And, so one of the ways that we believe that having these messages and being able to create these messages for Gen Zs to effectively use them is to create snackable content, moments in-store that allow Gen Zers to execute outside the store. We know that middle-class retailers can earn Gen Z’s loyalty with active participatory and powerful experiences. So we’ve spent a long time building stores with lots of products. We’ve established merchandise authority. We’ve put stores in the right places, but shopping a bunch of rounders looking for garments is not an Instagramable experience. Gen Z is looking for experience over product and they’re looking for something they can’t find online because they’re online all the time.

Andy Austin:
They’re digital natives that want experiences that are personal, that they can really bring into their aura and have the ability to put their own fingerprint and stamp on. They need to be tech-forward and they need to be entertaining.

Andy Austin:
Yep. If we have retailers who can provide already digital snackable pieces of content that can be easily brought into Gen Z’s handset, that gives them a canvas to be able to put their own font, their own messaging and their own personal brand onto it, marrying the retail brand with the Gen Z, or is brand with immediate amplification across their entire network. These kinds of things are perfect to happen in these retail stores. And we also know that we need to pull some of the product off of the retail floor because of the pandemic, make it feel a little safer to shop in, make it feel a little more airy. Replacing those what used to be just a bunch of rounders of product and a bunch of gondolas and merchandising with digital interactives that interface with the handset will provide the content and the energy that takes what’s happening in-store outside the store and continues conversations with not only Gen Z shoppers but all shoppers beyond the four walls of the location.

Brandon Rael:
And that’s truly a transformation of the mindset for the consumer as well as the retailers. So let’s shift a little bit here. We’ve seen the magic that TikTok can actually do, especially with that Ocean Spray campaign. When that skateboarder had a Fleetwood Mac’s on and drinking Ocean Spray, and it led to really significant organic opportunity from Ocean Spray and Fleetwood Mac, let’s talk a bit about authenticity and the values that brands need to really convey via TikTok and how that translates to a better engagement, but also a strong relationship between the Gen Z consumer and the brands going forward.

Andy Austin:
And there are a few ways to do this. We believe some of the terms that are going to define how to create this content and how to make sure that the Gen Zers have what they need are fun, social, communal, unexpected. We really need to find ways to give these consumers something novel and different. Otherwise, there’s nothing noteworthy to share and your example, Brandon, is a fantastic one. So in the white paper, we break it down into three things. The experiences that are happening in-store need to be novel, sensual and shareable. So novel because new experiences, spark neurons in the brain that trigger memory. We all remember our first kiss, we remember first things. So novel experiences. And remember Gen Zers don’t know what to expect when they come in store. So we can create these novel experiences. They’ll be shared for sure.

Andy Austin:
One of the things that we love about live spaces and that can’t happen online is engaging all senses. So they need to be sensual that will intensify the experience. So the ability to provide lighting and different things that are attractive that make the experience something that can’t happen online is something that we can only do in-store. And then of course, we all have to focus on it being shareable. They have to be bite-sized pieces of content. That’s the language of Gen Z. So some ways to execute that in-store, using apps and digital interactives, you guys had a great conversation last week with Mark Smith from Kitewheel. And there was a great conversation about apps and that now we are figuring out how to make apps really much more engaging so that we are overcoming app fatigue, which was happening when retail apps first started.

Andy Austin:
So we love that if you have apps that interface with interactives in the store, you activate the handset, make that part of not only the buying experience but the discovery experience in-store and Gen Z expects that from us as retailers, that’s required, the handset needs to be part of the execution. Apps are one way to do that but digital interactives that can then pull content into the handset are another way to do that. Throughout the location, we do invite shoppers to participate in fun Instagrammable moments that are easy to share. This will help peer influencers drive traffic to your stores. And [Darren Trinity 00:16:12] covered this a few weeks ago in one of your podcasts, it’s got to be authentic. Authenticity is key. The way to create authenticity is to use the retail location as a canvas and allow the Gen Z participant to put his or her own influence, spin, concern opinion onto that content that is what’s going to make it most reachable to other people inside and outside of their peer group.

Andy Austin:
Another thing that we love about live retail spaces of course, is the sales teams. We’ve all focused for years and years on training sales teams to have product knowledge and be able to guide a shopper through a customer journey. But one of the things that’s awesome about these digital tools is if we provide digital tools, sales teams that handle most of the discovery process, things like product knowledge, product attributes, pricing, and inventory. If you provide that to the sales team in a digital way, now sales teams can smile and make eye contact that allows us to build trust relationships, navigate the brand inside the location, and have conversations with Gen Z shoppers that are naturally amplifiable and they turn into of content and they expand beyond the store. The sales teams are an unbelievable tool in being able to connect with Gen Z. They want to talk to people who look like them.

Andy Austin:
They have a special language that they want to communicate in. And all of that becomes part of the content that influences the brand in and out of the store. All of this leads to a new concept that we’re really excited about. We’ve spoken for years about Omni-Channel. Every brand wants to be omnichannel, but omnichannel needs to have yet another redefinition. And by that, I mean, Omni-Channel now needs to become omnidirectional. When you’ve got all this content, when you’ve got people speaking about your brand in all these different ways, based on exciting novel, sensual, social experiences that they’re having in your stores, omnidirectional means you have to be willing to accept that the purchase process may start in store or only have a portion of it in-store, but end digitally. And we love that term omnidirectional because if you embrace this content and embrace the conversations that are being had about your brand, based on the interactions in the store, omnidirectional is absolutely going to lead to success.

Brandon Rael:
Omni-directional is the new one. That’s how I’ve been around the industry for a while, as well as… Absolutely spot on. Let’s transition a bit. So we know the physical store has been transitioning to a more experiential model where the customer is at the center of all the strategies. However, Gen Z is quickly emerging as a channel as the customer who is engaged to brands via social apps, retailers apps, TikTok, et cetera, and go in the store, interacting with store associates. What do you see the importance and significance of live streaming and gamification with this really emerging and powerful consumer sector?

Andy Austin:
That’s their language, Brandon, that’s exactly right. Live streaming and gamification are part of the way that they value their time. It’s how they choose what content to ingest. And it’s how they decide if content has value to them or not. So it’s funny, Brandon because I’m enjoying this conversation with you very much, but not a lot of Gen Zers are going to want to see two old guys sitting around talking like this. There has to be something that makes it that they want to put their own stamp on it, that they want to take that piece of content and say, “What this means to me is, or I enjoy doing this because…” That’s what gamification is. I participated in this thing. I received a reward for the time I invested in it. Now that reward is, might just be a badge or a feeling that goes along with it, but it’s something that I can share.

Andy Austin:
So all of that is part of their language. The key is that there is so much noise on the internet. And as we spoke earlier, the attention spans are so short that there has to be a way to create outstanding options for these kinds of content pieces. So there’s a ton of live streaming going on out there, but why aren’t we creating retail stores or taking advantage of what we used to call a retail store and turn it into a brand experience center for our brand that we know is going to lead to the two measurements that we used to be concerned with. We built these retail stores to increase intended purchase size and improve willingness to recommend. Willingness to recommend is an old person’s way of saying all the things we’ve been talking about in this conversation, live streaming, gamification, content creation, content sharing, snackable content, TikTok, all of those things are just different ways of saying willingness to recommend.

Andy Austin:
And for generations, we’ve been talking about these stores have to generate willingness to recommend. We need to get more people in the store and then we’ll go through a customer journey. So the retail store, when executed properly, when digitally enabled, when staffed with people who smile, make eye contact and care about those who come in and are armed to answer questions and have genuine conversations about price product and promotion, all of those things are going to become those pieces of content. And we know that the DTC brands are clamoring for live spaces, and it’s not just because they want to throw a ton of product out there. It’s because we all understand that these spaces give us a chance to differentiate and give the new consumer a canvas on which to take content that is important to us as the retail brand, put their stamp on it and influence others.

Brandon Rael:
Yeah, they’re all outstanding points. One final topic and question here is recently someone shared with me the Mad Men scene where Don Draper was presenting the, where he called the carousel, which was the wheel, I guess our grandparents’ generation, where they showed slideshow. He went into this whole profound, emotional, and nostalgic campaign around how the wheel’s actually the carousel. It brings back memories that bring that nostalgia. And it really connects you with an emotional level. Take it back to more modern times, a digital-first world, what can legacy retailers do to convey that message, to leverage storytelling, to leverage digital press strategies, to really connect from brand equity standpoint and messaging standpoint via social apps or their own strategies to connect with this new consumer sector has really has a limited attention span. The ones that kind of have brands that know them. They are authentic and provide a great experience. What could these legacy companies do and keep up with the direct-to-consumer brands or have that clear advantage of being digital-first always?

Andy Austin:
Thank you for this question. One thing I love about your question, Brandon. So you and I are talking to people all day long and we’re making decks. And I talked to my staff all the time that we talk about PowerPoint slides. And then my children are in school learning about Google Slides and they’re going to make decks and slides. These people have never seen a Kodachrome slide. My children will never have seen a slide. They have no idea why we call them slides. I think that’s really funny. I think about that a lot. And your question triggered that, but the answer to your question is it’s again, in these stores, we have an unbelievable opportunity and what’s wonderful about the consumers we’re talking about is they put their entire life online. So the ability to enable salespeople, who again they’re digitally interactive.

Andy Austin:
These salespeople don’t need training on how to use Instagram or TikTok or anything like that. But if we put tools in the salespeople’s hands to be able to connect with these consumers, when they walk in via the platforms they choose to use to talk about themselves, you can immediately drive that conversation. So if there was a tool where a shopper could come in and we were able to talk about, get their handle and talk about the things that brought them into the store, that same tool can immediately provide content that our marketing departments and that our merchandisers have created, that we know will become part of the lexicon of that consumer and become part of what they talk about when they go outside the store.

Andy Austin:
It’s about streamlining and removing friction in that conversation. There’s really no excuse not to know these consumers when they walk into our stores, once they tell us who they are. And there’s no excuse not to give them content back that makes it for them to amplify through the tools that they are using every moment of every day.

Brandon Rael:
Quick follow-up to that. So there is a friction reward principle that some friction, some would say, it’s actually a good thing that the art discovery matters that the arm of every single obstacle and every friction point, and that’s where the order of experience has kind of come to play. What your thoughts on that?

Andy Austin:
No, I totally agree. Now, when I say remove friction, I’m talking about removing the friction of transferring bits. Transferring a portion of these two and a half quintillion bits of data that are created every day. The concept of discovery and creating moments of things that I didn’t expect when I came into that store, that is part of friction, but those are the things that friction creates… Fires those neurons in your head, and creates those moments that you want to take outside of the store with you. And that’s where it comes down to being novel, to being sensual, to being shareable, all of those things. But we do have to take a look at the digital tools that are available to us today and the digital tools that we need to create so that we can get this digital content back and forth rather seamlessly and allow the Gen Z folks to take that content, put their stamp on it and amplify it for us.

Brandon Rael:
Excellent. Well, this has been a great conversation, Andy, where can listeners go and read the full white paper?

Andy Austin:
Just come to our website, please. It’s www.wearetheindustrious.com and we’d love to have these conversations with anyone. There’s a lot of great ideas out there about what these digital tools can do, and we are very grateful to have spoken with you today, Brandon, and would love to hear from anyone.

Brandon Rael:
It’s been a real pleasure. I want to thank you for joining and for the listeners for tuning in and thank you for the opportunity to guest host.

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