Gen Z: The $2 trillion force reshaping India's consumer landscape

As the largest generation in India's history, Gen Z, with a population of 377 million, wields a remarkable influence over the nation's consumer market.

A new report by Snap Inc. and Boston Consulting Group reveals that this diverse cohort, often mistakenly generalized as just teenagers, holds a staggering collective spending power poised to reshape the economic future of the country.

The report titled "The $2 Trillion Opportunity: How Gen Z is Shaping the New India" sheds light on the immense economic potential of this generation. It highlights their unique spending behaviours, influences, and the substantial impact they are making across various sectors.

A Force to Reckon With: Gen Z's Spending Power

Gen Z is not just participating in the economy; they are redefining it. With a collective spending power currently at $860 billion, they account for an impressive 43% of India's total consumption. This demographic is particularly influential in several key categories, driving significant spending in areas such as footwear (50% of total spending), dining (48%), out-of-home entertainment (48%), and fashion and lifestyle (47%). Projections suggest that their spending power could soar to $2 trillion by 2035, indicating that every second rupee of consumer spending in that year will be driven by Gen Z.

As of now, one in four Gen Z individuals are part of the workforce, contributing to a total spending power of $860 billion. This figure breaks down into direct spending of about $200 billion-money they earn themselves-and influenced spending, which includes purchases swayed by their preferences or recommendations, totaling $660 billion.

By 2035, the direct spending is expected to leap to $1.8 trillion, illustrating the immense potential of this generation as economic contributors.

The Social Influence of Gen Z

Contrary to the stereotype of being detached or disconnected, Gen Z places significant value on authenticity and meaningful relationships.

Approximately 70% of this generation relies on their close-knit circle of friends and family for guidance, especially regarding purchases. They actively share updates about their lives and seek opinions on decisions ranging from shopping to content consumption.

Interestingly, 80% of Gen Z individuals consult their friends before making purchases, underscoring the importance of peer influence in their buying behaviour.

This generation favours visual content, with 80% expressing themselves through images, GIFs, and immersive visuals. They prioritize genuine connections and demonstrate their authenticity through these visual mediums. This emphasis on shared experiences has given rise to trends like "shopcializing," where shopping experiences are shared with friends via photos or video calls.

Gen Z is seamlessly blending online and offline shopping experiences, with half of them likely to check wish lists or creator pages while physically in-store-a stark contrast to only 32% of Millennials doing the same.

The Disconnect: Recognition vs. Action

Despite their undeniable impact on the consumer landscape, there exists a notable disconnect between recognition and action among businesses. While 45% of companies acknowledge the potential of Gen Z, only 15% have actively leveraged insights about this generation in their marketing strategies. This gap represents a significant opportunity for brands to engage more deeply with a demographic that will shape the future of consumption in India.

To capitalize on the potential of Gen Z, marketers and businesses are encouraged to adopt five key strategies:

1. Rapid Innovation: Brands should innovate quickly to stay aligned with current trends.

2. Integrated Social Interactions: Brands need to weave social interactions throughout the shopping journey.

3. Visually Immersive Experiences: Creating engaging visual content online and offline will resonate with this audience.

4. Seamless Omnichannel Pathways: Ensuring a smooth shopping experience across various channels is crucial.

5. Engage the Right Influencers: Collaborating with influencers who genuinely connect with Gen Z can drive brand affinity.

Looking Ahead: A Bright Future

Pulkit Trivedi, Managing Director, India, Snap Inc., emphasized the significance of understanding Gen Z's economic potential. "India is a young nation with a 377 million Gen Z population, which will shape the future of India's growth in the next two decades. Gen Z will be the biggest contributor to India's consumption growth, driving $1.8 trillion worth of direct spend by 2035."

Nimisha Jain, Senior Partner and Managing Director at BCG India, further highlighted the need for brands to authentically engage with Gen Z. “Understanding and engaging with Gen Z isn’t just good to have; it’s necessary for winning today and will be imperative for survival tomorrow.”

As Gen Z continues to emerge as a dominant force in the Indian economy, businesses must adapt and respond to their distinct values and preferences. Ignoring this generation’s influence could mean missing out on the vast economic opportunities they present.