By Amal Ahmed, Director of Financial Services and EMEA Marketing at Signifyd

Gen Z represent $300 billion in direct purchasing power, and this will only expand as they get older. In contrast, older generations are more stagnant in their spending, somewhat due to the fact many pensioners are on fixed incomes. Despite representing considerable spending power, our data has revealed that Gen Z are cautious when it comes to money, and their returns behaviour is just one example of this.

Returns negatively affect the bottom line of businesses, who often have to cover the costs for returns expenses such as shipping and warehouse space. Because of this, it’s important that retailers understand the motivations driving Gen Z returns so they can better align to this growing demographic’s behaviour and – ultimately – reduce costs.

It’s in this evolving landscape that we conducted a survey in partnership with OnePoll, of 8,000 Europeans (2,000 surveyed in UK, Italy, Spain, France) that found 55% of Gen Z said they would return gifts, compared to just 13% of those aged 65+.

Stereotypes would have us believe that Gen Z are more likely to return gifts and purchases based on their impulsiveness and love of instant gratification: a previous article reported 60% of Gen Z shoppers have made a non-planned purchase “in the moment.” This implies there’s some rashness involved in Gen Z purchases. But is the disparity in returns data simply down to a realisation they no longer want or need the products they’ve purchased, ultimately driving returns?

I’d argue not; this assumption ignores the fact that as Gen Z enters the workforce, they show themselves to be careful and conscientious with their money, not impulsive.

Gen Z’s behavioural shifts align with their concerns when entering adulthood. Yes, they’re earning, but our research shows other factors influencing returns decisions, including ethical beliefs, monetary concerns, and the rise of ecommerce, all of which hold a greater role in Gen Z returns than the regret of an impulse purchase.

Gen Z are value driven

As Gen Z inherits a world riddled with challenges like climate change, recession, and ongoing geopolitical conflict, they’re meeting these challenges with ethics in mind, which not only influences their personal behaviour but what and where they consume.

Over the past few years, we’ve seen a trend of customers choosing brands that align with their values. Data shows that 60% of Gen Z shoppers believe it is very important for brands to be environmentally friendly. Retailers are rising to this concern by promoting sustainable lines, offering carbon-neutral deliveries, and campaigning for causes close to their audiences’ hearts.

As Gen Z continue to push for a brighter future, they’ll continue to be discerning with their money, only spending on products they see as aligning with their values and need for convenience.

Gen Z are money conscious

Stronger than values are practical concerns Gen Z face when having to rationalise buying decisions. The most common concern for 18-24 year olds when buying clothes, for example, was comfort, with Gen Z also spending the lowest on average for clothes of any age bracket.

Gen Z want quality goods on a budget; anything that misses the mark they’ll return rather than taking the financial hit. And the disproportionate amount of returns comes down, in part, due to where they shop: online.

Young woman with colored hair is shopping online with a credit card

The rise of online

Shopping online has increased exponentially in recent years, particularly since the Covid-19 pandemic. Covid shopping rates haven’t gone down either, with the number of people who shop online weekly rising 28% since Q2 2020.

Online shopping naturally leads to a greater number of returns. Fashion is a great example of this: when browsing and buying online, you’re not able to head to the dressing room to find the right fit. Additionally, recent data shows the most commonly purchased items in Europe in 2020 were clothes or shoes.

As a result, consumers are inclined to try before they (forever) buy, as we see in trends like wardrobing and bracketing, where consumers take items for a test run and return those that don’t fit or are no longer needed.

While online shopping is popular among all demographics, Gen Z still shops online at a higher rate compared to other generations, with over half (56%) reporting they prefer to buy online, compared to baby boomers who report they prefer to buy in store.

This naturally means that Gen Z tend to return online too, with our returns data showing that 70% of Gen Z return gifts via post (courier or postal return), while only one third return in store.

Given the necessity of returning online sometimes and given that Gen Z shops online more often than other generations, it only makes sense they also return more than previous generations.

Our research demonstrates that Gen Z aren’t impulse buyers, but a discerning and critical market, who seek better value for money while remaining ethical. Additionally, given they both shop and return online, the greater rate of Gen Z returns is completely understandable.

After digging into the data, it’s clear the reasons why Gen Z are more likely to return gifts than their grandparents are complicated, and multi-faceted, and businesses must work hard to understand this emerging market.

Knee-jerk reactions to increasing returns are likely to put consumers off (our data showed 71% of customers thought ease of returns was “very” or “fairly” important). This shows that returns are unlikely to decrease, even if one resorts to charging for them. Therefore, it is important that retailers shift their attitude in how they respond to consumer demands.

To respond to ever-changing consumer demands, retailers can think about the bigger picture, beyond checkout and delivery.  This means ensuring that their processes are finely tuned. Whether that’s payment optimisation to remove friction throughout the checkout and returns process, or fraud prevention that supports retailers with verifying whether purchases – and returns – are genuine. Making each stage seamless will allow retailers to improve their performance meanwhile offering a great customer experience that all generations are looking for.

Signifyd is the market’s leading commerce protection provider of an end-to-end Commerce Protection Platform that leverages its Commerce Network to maximise conversion, automate customer experience and eliminate fraud and consumer abuse risk for retailers.

Published 22/04/24




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