While the IMF forecasts inflation to decline by approximately 5.9% in 2024 and 4.5% in 2025, Gen Z and younger Millennials are into the “underconsumption core”. This trend that emerged on TikTok has been ongoing until today, in the past month, in July 2024. These generations place more importance on product quality than price. Also known for their concern about the state of the planet, this also contributes to their joining in the trend. Since Gen Z’s global purchasing power is increasing, businesses need to adjust their strategies to meet these changing consumer preferences.
What business benefits from the underconsumption core?
1. Retail and E-commerce
Gen Z and Millennials are highly engaged in retail and e-commerce, driven by convenience, sustainability, and personalization. Businesses can meet these needs to gain customers from these generations.
Consumer Goods: Retailers can adjust their product offerings to align with current spending habits, focusing on value-for-money products or essential goods. Understanding underconsumption helps in inventory management, pricing strategies, and promotional efforts.
Luxury Goods: High-end brands can benefit by targeting niche markets or creating accessible luxury items that appeal to cautious spenders. According to Luxury Retail Australia, Millennials and Gen Z increasingly gravitate towards luxury goods due to their quality and as a symbol of their individuality.
Second-hand Marketplaces: Businesses in the resale or second-hand market can take advantage of the trend toward more mindful consumption and sustainability. Pre-loved or thrifted items are attractive to these generations due to unique finds and higher-quality goods at cheaper prices.
Digital Platforms: Companies providing digital services (e.g., streaming, online education, virtual experiences) can benefit as consumers shift their spending from physical goods to online experiences.
E-commerce Tools: Platforms that help small businesses or e-commerce can thrive as more businesses seek to engage with cautious consumers online.
2. Financial Services
People are spending less and less due to the underconsumption trend. Providing advice on where they should invest and helping them to save more can help them focus on increasing their savings rather than spending.
Investment Firms: With the fear of missing out among Gen Z, 47% of them choose to invest. This has great potential to understand underconsumption trends helps advise today’s generation on where to allocate resources.
Savings and Investment Products: Banks and financial advisors can develop products that appeal to consumers focused on saving rather than spending, such as high-interest savings accounts or investment plans. For Gen Z, they have been focusing more on savings than other generations.
3. Health and Wellness
Health and wellness are top priorities for both Gen Z and Millennials, but they approach them in distinct ways. Millennials, also called the “wellness generation,” are deeply invested in their health. They’re proactive about it, smoking less and exercising, to stay on top of their wellness goals. On the other hand, Gen Z is also health-conscious, but their focus leans heavily toward mental health. Hence, companies can focus on prioritizing health, such as in wellness, food or fitness, that need this demand. Providing mental health services could also serve as an opportunity for businesses.
4. Home Improvement and DIY
Gen Z and Millennials are really into DIY projects, mostly because of social media trends and a love for making their spaces unique. With more time spent at home, there’s been a growing focus on home improvement, making it a great time for businesses that sell home goods, furniture, or DIY tools. Companies in the home entertainment space, like those offering electronics or gaming gear, are also seeing continued interest as people look for ways to enhance their at-home experiences.
5. Subscription Services
Both Millennials and Gen Z share almost a similar preference. While Boomers are always on the hunt for good deals and aren’t afraid to switch to a cheaper option, Gen Z and Millennials tend to prefer services that offer personalized experiences and flexible subscription plans, according to PR Newswire. Also, businesses can offer subscriptions that cater to their essential needs, such as groceries and personal care items. These generations are also more willing to share subscription costs with family or friends.
Conclusions
The underconsumption core trend presents both challenges and opportunities for businesses. Retailers, financial services, health and wellness, home improvement, and subscription services can adapt their strategies to meet the evolving preferences of Gen Z and younger Millennials focused on quality, sustainability, mental health, unique living spaces, and flexible essential subscriptions. By understanding and responding to this trend, companies across sectors can engage these influential generations of consumers.
