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Generation Z ‘Me-tail’ Entrepreneurs, Growing Threat to Retailers

Young entrepreneurs are using technology to build their own businesses.

Lagging teen retailers like Abercrombie & Fitch, American Eagle and Aéropostale shouldn’t look solely at each other as competitors, but also at some of their former shoppers. That’s because a growing number of digitally savvy Generation Z entrepreneurs, ages 13 to 17, have set out to create their own small businesses — and collectively, are becoming serious contenders in the retail space.

The Intelligence Group, a division of Creative Artists Agency, has dubbed this new wave of entrepreneurship “me-tailers,” a rise of young consumers who are becoming their own merchants via social media platforms and phone applications. Having grown up with social media, these young people are using what’s familiar to them to generate a revenue stream.

Though Gen-Zers are less likely to have spending power, it is still significant: They directly influence about $600 million in consumer spending every year and compose around 40 to 46 million individuals in the U.S. alone.

And their entrepreneurial spirit is only growing.

In the same study, TIG found that in the past six months, 18 percent of that generation sold something on a resale site like Craigslist or eBay, 17 percent sold their own items online or at a consignment store, and 8 percent sold products they made themselves online.

“They’re younger and haven’t met their spending peak yet,” said Jamie Gutfreund, chief strategy officer of TIG. “Their purchasing power is limited just because of their age, but Gen-Zers are the CTOs [chief technology officers] of their families and are the true digital natives of the households. They are driving and consuming in a new digital way by informing their parents on best consuming practices, whether scanning barcodes with their phones or using specific apps. They are truly consuming the Web.”

According to TIG, more than 50 percent of 12- to 17-year-olds are accessing the Web via mobile devices only. In another study, by the Pew Internet and American Life Project, of those in this age group browsing their phones, 95 percent use the Internet, while 81 percent of them use social media sites. Facebook is still the most widely used, with 94 percent of teens reporting they have a profile there. In contrast, Twitter was used by 12 percent of teens in 2011 but more than doubled to 26 percent in 2012. With Instagram, 11 percent of teens reported they were active users.

On Instagram alone, the Gen-Zers are inviting their peers to become their customers by selling their items via the hashtag #forsale, to make them searchable, and using applications and sites like Hashbag and Paytagz to organize these posts into a marketplace. A simple search on the site Hashbag, for instance, allows any user to find specific items that are up for sale on Instagram. Other users on Instagram leave their e-mail addresses linked to their PayPal accounts to initiate a one-click transfer.

“Every moment is a shopping moment for them,” said Gutfreund. “They’re doing tons of research — more than any other generation — on what to buy.”

According to a study by the JWT Intelligence, Gen-Zers, more than any other generation, seem to prefer online shopping to offline, with 55 percent of teens preferring the former. In the report, 57 percent preferred online shopping over brick and mortar for accessories, and 55 percent for shoes.

More than any other generation, they consult their peers before purchasing any apparel. In another study by TIG, 84 percent of all Gen-Zers’ purchasing decisions were influenced by the opinions of their peers, friends or family members, with 11 percent consulting social networks before purchasing items.

“From the real world to online, their purchasing decisions are influenced by opinions of peers, friends or family members,” said Gutfreund. “On Instagram, it’s an instant way to seek approval and see what they should or shouldn’t buy.”

The “me-tailing” competition for retailers may seem threatening, but it presents the potential to think of business in a new way: working alongside creative individuals to build upon meaningful relationships. Already, a handful of retailers have recognized the importance of this new way of consuming.

Asos, for instance, allows people to list and sell their new or pre-owned clothing in the site’s Marketplace, an open online boutique.

The British e-commerce site launched the boutique in 2010 open to young designers or consigners, and saw that me-tailing would enhance their own offerings.

“Setting up Marketplace was a natural fit — we give this amazing window to young fashion entrepreneurs,” said Katie Oldham, senior Marketplace manager for Asos. “As our customers wanted it, it presented a great opportunity to support young entrepreneurial fashion businesses to reach a global audience of fashion lovers. We quickly saw trends emerging and have seen progression of Marketplace boutique sellers to be stocked on Asos.com. [It] diversifies the product offering across the Asos business.”

Urban Outfitters is also embracing the trend, carrying art prints on its Society6 Web site, a community of thousands of artists who sell their artwork worldwide through a variety of products. Artists are given a specific amount depending on product types they intend to sell. For instance, stationery cards will make a profit of $1.20 to $2; hoodies will make $4.20.

Anthropologie, part of Urban Outfitters Inc., has a Featured Artists section on its site where it features and sells young designers and their stories.

“These retailers are learning not to ignore these young entrepreneurs, but embracing them — that’s the biggest lesson,” said Gutfreund. “At the end of the day that’s the big paradigm shift, learning how to be a retailer with this new rising generation and their new ways of shopping.”