As consumer behaviors continue to undergo dramatic shifts due to over a year in a pandemic, new research data from PayPal is revealing the shift in post-pandemic consumer spending habits specifically among Gen Z and millennial shoppers, who are gearing up for summer activities.
According to a survey by Atomik Research, commissioned by PayPal of over 2,000 Gen Zers and millennials in the U.S. in May 2021, 60% of young consumers are “excited and happy” to return to in-person gatherings. Moreover, these consumers are making purchases with specific events in mind.
These two generational cohorts are also likely to use flexible payment options such as buy now, pay later (BNPL). In a separate report from eMarketer, the firm found that Gen Z and millennial consumers make up a whooping 75% of all BNPL users.
Regarding what they’re buying for, PayPal’s survey showed that 39% are making purchases for birthdays, 25% are purchasing for travel and 21% are making purchases for going on dates.
And as they shop, PayPal’s research revealed Gen Z and millennial consumers are looking for “nostalgic and comfort looks.” Notably, the survey found 39% of women plan to shop for crop tops, 32% will purchase 1990s nostalgia looks and 25% plan to buy 1990s hair accessories.
“Transition wear,” the company said, is also helping consumers emerge from lockdown, with 51% of women saying they are shopping for casual footwear and 21% shopping for athleisure, while 40% of men are on the hunt for casual clothing and 41% are looking to buy casual footwear.
Meanwhile, while these young consumers are ready to shop, they are continuing to pay close attention to finances — making financial awareness a trend. According to PayPal’s data, 27% of Gen Zers and millennials are reading more news and seeing more social media posts about personal finance, while 24% said they have been impacted by friends and peers changing their spending habits.
“The return to gatherings and events is giving consumers more inspiration and reason to shop, while at the same time they are paying close attention to spending and finances,” said Jill Cress, VP of consumer marketing at PayPal. “Gen Z and millennials are fast adopting products like Pay in 4 from PayPal to update wardrobes and plan vacations as it provides a flexible payment option that complements their post-pandemic lifestyle and mindset.”
In fact, 41% of consumers told the company they delayed purchases during the pandemic, and 58% said they are experiencing a reduced household income — making the need to manage budgets top of mind as consumers shop for summer activities. Moreover, 60% of respondents said they are rethinking what items they need and how they plan to pay for them, with 57% saying they feel using a buy now, pay later (BNPL) option is a smarter way to shop.
PayPal recently partnered with celebrity stylist Maeve Reilly to share items she purchased using PayPal’s Pay in 4, in order to refresh her summer style. Known for working with Hailey Bieber, Megan Fox and the D’Amelios, Reilly used PayPal’s Instagram stories to launch a poll called “Needs vs. Wants,” featuring items from FarFetch, Target, Nike and NastyGal, which can all be purchased using PayPal’s Pay in 4. The results of the poll will be shared through social media on July 8.
In the eMarketer report, researchers at the firm said over 45 million people over the age of 14 will use BNPL this year, which represents a staggering 81.2% gain over the number of users on the platform in 2020.
“Millennials will continue to make up the greatest share of the user base through the end of our forecast in 2025,” the authors of the report said. “Last year, more than 40% of BNPL service users were millennials. That said, Gen Z will eat into this share over the next four years, as this cohort ages into digital shopping.”
In 2018, Gen Z had 1.7% penetration of the BNPL user base, compared with 1.4% for millennials and 0.6% for Gen X. By 2025, Gen Z is forecast to have 47.4% penetration of the user base compared with millennials’ 40.6% penetration and Gen X’s 30.9%. The figures represent the penetration rate of digital buyers in each group, and not the market share of all users.
“A major draw of BNPL services, particularly for younger cohorts, is financial flexibility,” eMarketer said. “These solutions provider younger consumers, whose cash flow tends to be more limited, with great flexibility in payments, especially for larger-ticket items.”
The eMarketer report follows a fierce battle for market share among the top companies offering BNPL such as Klarna, PayPal, Affirm and Afterpay. Last week, Afterpay, for example, expanded its app to include retailers and brands such as Amazon, CVS, Dell, Kroger, Macy’s, Nike, Nordstrom and Walgreen, among others.
The expansion by the BNPL providers is also not limited to Gen Z and millennials alone. The companies are wooing Gen X and baby boomers by touting the same attributes embraced by younger generational cohorts. This includes financial flexibility, low or no interest rate charges and the ability to buy larger-priced items via payment installments.