Have you ever been to a grocery store with no cashiers? What about a restaurant with QR codes on the table? Have you ever given your spare change to someone less fortunate using only a smartphone?
If so, you’ve had a taste of everyday life for Generation Z in China, a demographic with a notably more digitized experience than its Millennial and Gen X predecessors. Their consumption habits, and the impact of those habits on global brands, is the topic of a new book chapter from two UNC Greensboro Bryan School professors in the Department of Marketing, Entrepreneurship, Hospitality, and Tourism.
The book is called “New Generation Z in Asia: Dynamics, Differences, Digitalization,” and was released in October. Dr. Zhiyong Yang, Professor and Department Head, and Dr. Jiyoung Hwang, Associate Professor, wrote the chapter “Generation Z in China: Implications for Global Brands,” and the two of them recently sat down to discuss their work.
What have you learned about Gen Z in China?
DR. HWANG: Before my trip to China I didn’t really understand how life had been advanced in China. When I visited Shanghai for my other book writing (Future of Retail Business) for example, they mostly use their smartphones to make any payment. Even at stores if you bring your cash, they don’t accept it and the lifestyle in China was very surprising. Generation Z has been surrounded by this their whole lives and their thinking is very different from older generations, and their work-life is very different. So in China, smartphones were introduced not too long ago, but Generation Z would be the first generation to visit any store or restaurant and scan a QR code on the table to order food on their smartphone — very different than in the U.S.
DR. YANG: They got used to automated retail stores, purchasing online, calling for food deliveries, and using digital wallets all the time. They even use smartphones to purchase from street vendors.
DR. HWANG: One thing that surprised me in Shanghai is I went around my hotel and ran into a homeless person and he had two QR codes, Alipay and WeChat Pay, the two dominating mobile payments, on his chest because they accepted mobile payment to give them money.
DR. YANG: What is unique about Gen Z is the influence of virtual opinion leaders, a person who may have 30 million followers, with an average sales of $1.5 million U.S. every day. These personalities are not only opinion leaders, but they are extremely popular among this generation. Living in a digital world, Gen Zers in China are attached to their smartphone. On top of that, they are immersed in social media. These opinion leaders change not only their tastes of commodities but also their values and lifestyle.
DR. HWANG: Social media is getting more important in commerce as well. They are very in the world of social media, with stats suggesting around 70 percent of individuals preferring to buy products through social media, a lot higher than other countries.
As far as the implications for global brands — what did you learn about this generation’s consumption habits or views of business in general?
DR. YANG: Many members of Gen Z are very different from my generation. The first difference is hard work. Most Chinese people in Gen X value hard work. For example, to become an entrepreneur and create a business, a golden role for Gen X is to have the experience of working in the industry for at least 10,000 hours. In other words, Gen Xers need to become an expert in that field first, before thinking of starting a business in that area. Gen Z, however, is more entrepreneurial than previous generations and thinks there are boundless opportunities. Many Gen Zers start their companies right after graduation from university. There is no wonder why the success rate is extremely low. For a few successful members of Gen Z, at a young age, they become rich and create or own a business. However, many of them go bankrupt and start over again. They are more risk-taking and do not value stability. The second difference is socialization. Gen Zers in China would struggle in real life with socialization with other people but they are immersed in the virtual world. On the whole, they are more or less spoiled. The situation is most of them grew up a single child in the family so they have some psychological issues when it comes to connecting with friends, sometimes becoming superficial. They have had a hard time connecting with others in the physical world. The third difference is the speed of feedback. Nearly 60 percent of Generation Z in China have mobile phone dependence, with 31.6 percent spending more than five hours a day on a small screen and 66 percent using smartphones for social purposes. Generation X is used to receiving feedback periodically (weekly, monthly). However, Gen Z wants feedback right away. But they also want to enjoy their life. They don’t want to be supervised or have a fear or pressure of working hard. They want freedom. So this will bring challenges to companies that hire a significant portion of Gen Zers. The fourth difference is a global experience. Compared with earlier generations, many members of Gen Z had a chance to live abroad due to China’s economic boom. During summer visits, they have been exposed to the western world, which is different from their parents. They know English and it would not be a surprise to hear them say the western world is good. Finally, Gen Z has much more spending power than previous generations. On average, each Gen Zer has $90 pocket money to spend on their will and exerts significant influence on a much larger amount of family spending.
DR. HWANG: I think for global brands building social relationships through social media or social influencers will be very important tactics to use to connect with Generation Z in China. Not many brands in other countries actually do live commerce. Using social media such as Douyin (a Chinese version of TikTok), they do live streaming video talking about their brands on a smartphone, they connect on social media with others watching, and sometimes they can buy the products right there on their smartphones as well. It’s a different approach. Global brands who want to enter China’s market will want to build relationships in the virtual world. They will want to utilize social media influencers. There are so many different types of social influencers, but there’s big money there. Another thing, we are talking about digital connection, a virtual world, this digital culture, and lifestyle, but for Gen Z they also want some offline experiences. Sometimes they feel isolated and disconnected from the real world so they want an offline connection, and one way to do that is a digital detox or an offline experience.
What about brand loyalty?
DR. YANG: Brand loyalty, I think, is low. It’s not just low for global brands but also low for the local brands. They want to try new things, express who they are on social media, use brands as a channel to connect with others. Because of that, members of Gen Z want to inject or project themselves into a story. As a result, when marketers introduce a brand, a good way to do so is to connect with them through live streaming or story building.
DR. HWANG: Those with more household income prefer luxury brands, they want to look cool. It’s very important for them. They’re spending on luxury brands and lifestyles. Chinese Gen Z is a big consumer group for luxury brands.
DR. YANG: Spending money on luxury is way higher than previous generations. This is for self-expression. Gen Z wants to be more into this virtual world, to show identity. So anything global brands can do that ties the story to them and can help them build that identity, and that’s the stuff they’re looking for. Also, endorsers are not famous people like movie stars. They may appear like a normal person who could not find a decent job in the physical world, but in their live streaming, they look cool and have built up a connection with Gen Z. In addition, because Gen Z wants something labeling their self-identity, some companies use scarcity. They introduce new models of an item very frequently. There will be a new product every week showing up with only 10 to 60 of one model, only just a sale to sell 10 to 60 pieces. This is really popular, to say, “Oh, I’m unique, different from the rest.” There are many Chinese manufacturers, they are happy to do this. It’s interesting, they’re happy even if the economy of scale is not there, but they charge a premium price out of that.
In the digital age, how will data factor in?
DR. HWANG: I was looking around a supermarket in Shanghai with a manager at Alibaba, the No. 1 online retailer in China, and there was a small vending machine and there was a big line. It was to give a small gift for free if they scanned their smartphone. So I asked, “Why?” The manager said the supermarket is doing that to understand when and where people visit the store. Brands are going to hone in on data whether online or on mobile or offline. Whenever they are able to gather any data to approach the right consumer at the right time — big companies in China will use as much data as possible to enhance efficiency. Gen Z doesn’t really mind; there were several situations where the private information was exposed but I think they didn’t really mind. My expertise is in retail and in the U.S., we have Amazon Go and Amazon Go Grocery that are automated stores where you go and you verify your identity with your smartphone and you shop without waiting in line. When I visited Shanghai I found there are many more automated stores in China. Those unmanned stores are very normal with face recognition and mobile check-out. They consider this normal.
DR. YANG: I think a part of the reason that they are less concerned about privacy is the Chinese government. The government sets up lots of cameras and also if you go to transportation, or bullet train or at the train station, you have face recognition. The Chinese government asks them “Do you want to have a safe world? These systems can identify bad guys and keep you safe.” They’ve had an education if you are a good person you don’t need to worry about that. People all know big data has pros and cons; the positive side is convenience, which is very important for Gen Z. Also, because Gen Z purchases items mainly online, companies in China have spent huge amounts of money on collecting their data, analyzing it, and using artificial intelligence to predict their future consumption patterns.
Did any of your findings surprise you?
DR. YANG: Before conducting the project I knew Gen Z grew up in a digital age but I never thought they would be so immensely impacted by online opinion leaders and live streamers. There is one person who couldn’t find a job so he opened an online store. His daily job is to do live streaming of him putting on lipstick. He has three million followers now and gains a revenue of $500,000 U.S. through endorsing cosmetics products. From a traditional sense, he is not successful. However, in the virtual world, he is very successful and earns $1 million U.S. annually. My first impression is that this doesn’t make sense. How could a person who has no credibility, and could not find a job in the physical world become so popular? If I were the manufacturer of cosmetic products, I would have a famous person endorse the brand. This is a safer choice and can ensure a certain level of success. It’s interesting how it works in China. In addition, another surprise is the new approach of promotion that becomes popular in China: story building. For example, there’s a brand StayReal. Its promotion combined coffee with fashion brands and generated interesting stores that integrated clothing, coffee, and music, to convey a way of life to Generation Z. It became very popular among China’s Generation Zers, as it projects that shopping and leisure are the same things as life itself; stores are not only stores but also social or living places. These all allow China’s Generation Z to have a better brand experience, thus driving sales. By doing so, their high expectation of convenience, efficiency, mobile, and omnichannel experience is satisfied by the brand experiences offered by companies. They have people carrying on that lifestyle with a way of communicating or projecting to Gen Z, life projected to the virtual world, a lifestyle to followers.
DR. HWANG: The impatience level of consumers in China is very different from our normal expectation and retailers have created a new notion of “convenience” in China. For example supermarkets by Alibaba deliver fresh groceries in 30 minutes. The goal is to get rid of refrigerators at home in the near future because they can fill any needs in 30 minutes. That’s a very different expectation than other countries; they are living a digital and very convenient life, mobile payment as well, for retailers it’s important.
DR. YANG: A lot of people targeting consumers, they don’t really know what’s happening. With the grocery store deliveries, the biggest thing business people need to know is Gen Z can’t wait for two-day delivery. For them, that is too late. They prefer the delivery within two hours, half-a-day, or the same-day, but are not satisfied with next-day delivery. To them, fast delivery is a basic expectation, rather than a benefit. Online stores, Internet shopping is so popular in China, ordering through the phone. The delivery, the human labor cost is very low. You have lots of people looking for jobs to become a delivery person, they’re on motorcycles not respecting traffic rules, many rushing to that industry so the labor cost is extremely low. You can sustain a system like that with the labor cost.
Is anything on the horizon for you both?
DR. YANG: I have been thinking of a project that digs into a particular consumption pattern of this generation. For the next project, my target is a top-tier academic journal, which usually prefers very specific topics, going deeper rather than broader. The book chapter is from a broader sense to understand this generation’s digital consumption. So now it is time to go deeper. The actual topic has not been chosen yet, but I’m getting there.
DR. HWANG: Gen Z is a really important consumer group globally as well as in China, not only because of their purchasing power but also because of their unique characteristics and behaviors. For example, influencer marketing and social commerce are insightful topics for future research.