Can Millennials and Gen Z Fuel the Return of Retail?

In 2019, retail stores closing their doors outnumbered new retail outlets in the US by two to one. Meanwhile, Amazon and other major online retailers continue to grow market share and revenue.

To the untrained eye, things look grim for retail.

But something else is happening below the surface. 81% of Gen Z prefer to buy products in stores, and 58% use shopping as time to live in the moment and disconnect from social media. Millennials are initially skeptical about the authenticity of any brand, whether sold online or in a brick-and-mortar outlet.

Retail isn’t doomed. Rather, retail leaders and the real estate developers that cater to them must tailor the property and shopping experience itself to meet Gen Z expectations and satisfy the Millennial demand for authenticity.

Despite conventional wisdom, Gen Z and Millennial shoppers frequent retail outlets more often than their parents and grandparents. They also enjoy the retail experience more — with some key caveats.

Popular market wisdom holds that Gen Z is the first generation of true “digital natives.” They grew up with smart phones and social media. They treat iPhones as natural extensions of themselves.

Constant immersion in the digital realm saps the novelty from online retail. Baby Boomers and older generations who came of age without the internet still view online shopping as an incredible new convenience. For Gen Z (and to a lesser degree, Millennials), who spend an average of five hours per day on their phones, Amazon is just the new normal.

Retail outlets can offer younger generations an experiential novelty that contrasts with their relentless digital immersion. Millennials respond to the overt authenticity and uniqueness of small, local shops without corporate baggage, and Gen Z-ers love having an excuse to put smart phones in their pockets and live in the now.

Constructing an experience that will earn the loyalty of younger generations means taking a close look at how their preferences depart from historical shopping norms. Gen Z and Millennials won’t flock to just any retailer — the brand and experience needs to meet or exceed their expectations.

Unlike older generations, Gen Z and Millennials don’t enjoy prolonged interaction with customer service representatives. They want to navigate the shopping experience on their own terms. They also lose enthusiasm when confronted with long lines and generic branding.

Developers and investors can work with retailers to create genuine, unique experiences around their stores. When a Millennial shopper buys a new shirt, they don’t just want the shirt itself — they want the memory of walking through a trendy shopping district with friends and finding a quirky local shop. They may even seek a wall mural painted by a local artist to stand against for a quick Instagram photo. It is for this reason that developers and investors should care not only for the property, but for the surrounding region, understanding that a location can be as “on brand” as the retail outlet itself,

Hunting for a recession-resilient investment? Find retailers who are building shopping experiences to earn Gen Z and Millennial loyalty. Look for opportunities to develop small, unique outlets in trendy, non-corporate shopping districts — or create a new district entirely!

Keep a close eye on key metrics like job growth, median income, and median age for a given area. An influx of young people with considerable discretionary income is a great indicator that a district might thrive with the development of retail focused on Gen Z and Millennial experiences.

Real estate classes like multifamily developments, self-storage, and retail are inherently great at weathering bad markets. Districts filled with retailers who earn Gen Z and Millennial loyalty will keep doors open and shops busy even during hard times. Developers and investors have an incredible opportunity to put money into generation-conscious retail outlets and build underdeveloped areas into new bespoke shopping destinations.

Ari Rastegar is the Founder and CEO of Rastegar Property Company, a private real estate investment firm.