How Gen Z Calculates Risk When Shopping in a World of Too Much Choice

Gen Z Calculating Risk Featured

In 1984, Pepsi introduced the world to a brilliant, iconic slogan that would power its brand (with a little help from “the Michaels,” as in J. Fox and Jackson) for the next decade: “Pepsi. The Choice of a New Generation.”

Thirty-one years later, the “new generation” is Generation Z. And when it comes to choice, Gen Z faces more of it than any generation before them. Loosely defined as anyone born after 1995, Gen Z is two billion strong globally with already $44 billion to spend. The unlimited choice of this fragmented, tech-enabled, socially shrewd new generation is amplified by their relationship with, and how they think about and approach, spending money.

We invited a group of 27 Gen Zers, ages 13 to 20, and six executives from the banking, retail, electronics, and apparel industries, to participate in a full-day interactive session, Gen Z and the Future of Money. The goals for the day were to explore how this generation spends, manages, and saves their money, and to get their ideas on how to make spending and saving easier, faster, and more streamlined.

One topic that many of the group had a lot to say about was the risk inherent in spending. With all the choice that money gives this generation, and all the access technology affords them, comes a whole lotta risk: in how and where and why they spend or save it. For instance, the risk of getting ripped off online (will that pair of shoes ordered 4 weeks ago ever arrive?). Or even the risk in the act of paying itself – be it with cash, debit, or credit card, or with new, peer-to-peer digital methods like Venmo, Bitcoin, or Snapcash.

How, then, does Gen Z think about and approach this risk when faced with a seemingly endless stream of shopping options? We did the math.

More Choice + Easier Access ≠ Less Risk

With the world (literally) at their fingertips, it’s obvious that Gen Z turns to the Internet to get a lot of their shopping done; music, books, makeup, and clothes were all popular online purchases mentioned by the group. E-commerce usually happens, as one participant said, “if there’s a really good deal, like 40% off,” for easy comparison shopping (for wedding or prom clothes, for example), and for filling up digital shopping carts as a “wish list” for later. But what might not be so apparent is that Gen Z’s “tech-enabled” know-how doesn’t always mean they’re cool with the online shopping experience. Our group was leery of the pitfalls of spending money online, especially large sums. One male participant summed it up: “I feel scared to spend more than $500 online.”

There’s a lot of uncertainty in buying something that you can only see as a 2D picture on a laptop, tablet, or mobile phone. And Gen Z is hyper-aware of that. “I just feel like buying stuff online is kind of riskier because you don’t actively have it in your hands,” said another teen. “It could be some kind of scam where you can’t see if it’s broken or if there’s something wrong with it.”

Guarantees > Trust

The group agreed: the more expensive something is, the more they’re willing to pay to ensure they’re not being cheated. And often this means buying from physical stores or known and trusted brand websites rather than simply hunting for the best online deals and steals from third-party sellers. For example, one teen who bought a camera directly from Nikon’s online store, not Amazon – where she could have found it for less – said she was happy to spend the extra money simply for the peace of mind she received in return.

Ultimately, though, trusting a brand or online source because of its reputation isn’t enough. It’s about having the right safeguards, like return policies and warranties, in place. As a 14-year-old participant explained, she chose to buy a Nintendo DS directly from Gamestop as opposed to finding a better deal on eBay because it was “backed by assurances, guarantees, and a known return policy.” Others in the room concurred. “Having a solid return policy is key,” another participant chimed in, “especially if you’re buying something and you’re not sure of the quality or the maker.”Calculating the Risk.small

Friends & Peers + Online Reviews = Research

The group was also leery of placing blind trust in online reviews, knowing that many are not 100% legit. When it comes to the written online review, Gen Z doesn’t avoid them, they’re just skeptical about them. Reading reviews is just one check on a list of how they go about researching prior to making a purchase. They place the greatest trust in real people they know and can identify with doing the reviewing, like friends and YouTube celebs they feel “get” them.

Gen Z is acutely conscious of being swindled and scammed when spending. It makes sense: they were raised in the midst of a global economic recession fueled by risky mortgages and default credit swaps. Consequently, they’re ultra-savvy – conservative, almost – about where and how they choose to spend their money. They’re a lot like the Silent Generation in this way: mindful, resourceful, cautious. Gen Z wants to know that when they throw down, no matter where that may be, what they get in return is of the highest quality and comes with the lowest risk.

Regardless of industry, how are brands planning to mitigate risk for this next generation of customers? Are they working with them to create products, messaging, and experiences that are authentic, accessible, and relevant to the things they care about most? Gen Z is growing up fast. The ultimate question for brands is: will they grow with or without you?


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