Gen Z Are Driving the Consumption Economy – What Does It Mean for Merchants

Consumers have changed. Technology has called upon a shift that has enabled people to select what, how, and when they want a specific service or product and to determine when to pay for it. They are looking for flexible ways to engage with businesses.
Customers today have a new set of expectations. They demand outcomes, not ownership. Personalization, not generalization. Constant enhancements not planned outmodedness. The result? Businesses are revolutionizing the way they sell their products and services.

In the fight for business survival, businesses today are under more pressure than ever to shift the way they approach customer experience, which has given rise to some significant innovations and new approaches to delivering value to customers on their terms – most notably, the Consumption Economy.


The consumption economy refers to the general trend of merchants shifting to a subscription business model. The subscription model comprises selling recurring subscriptions to customers for access to a product or service. This contrasts to the conventional business model, which was built around one-time transactions and standard products.


Subscription models are soaring. According to Zion Market Research, the subscription and billing management market is expected to reach $10.5 billion by 2025 (it was at $3.8 billion in 2018)!

As a customer, there have never been surplus choices or accessibility to brands/businesses. Today, the subscription models offer a great way to have a taster of all sorts of products before committing.

For Gen Z, who matured with media-on-demand, and next day delivery, subscription services are the norm.


Gen Z can be classified as ‘Digital Natives,’ meaning that they have grown up in the digital age, which radically influences their outlook on life. Furthermore, they concentrate on the environment and sustainability while demanding flexibility, ease, and control in their life.


Subscription eCommerce services offer Gen Z – often the young, wealthy urbanites – a comfortable, personalized, and often cost-efficient way to purchase what they want, when they need it. However, these customers are much more volatile with high churn rates, as they will easily unsubscribe if a service doesn’t meet their superior expectations.

Why is Gen Z flocking the consumption economy?

With the advent of always-connected customers, hard-selling has become a thing of the past. From Xennials to Gen Z, everyone prefers the flexibility, convenience, and personalization that technology has to provide. While the affinity towards subscription models is not restricted to just Gen Z, it’s interesting how obsessed most people are with them. But what is it really about the subscription model that Gen Z gravitates toward?

Today, customers prefer access without ownership, flexible, timely consumption of products and services over heavy, long-term investment models. For example, why should a customer purchase a CD or DVD when they can pay a monthly fee to Spotify or Netflix and enjoy an almost limitless and most updated selection of media? Why would they purchase a hardcopy of a book when they can read it on Amazon’s Kindle Unlimited? Why would a customer possess a Gucci when they can rent one and wear a different luxury brand the next month?

Today, the way people purchase, utilize, own, and interact with goods has changed – forever. ‘One size fits all’ is no more a mantra that works for all consumers. Exclusive, bespoke offerings work efficiently, where every customer is empowered to personalize his/her own experience.

So, how can merchants address the needs of Gen Z?

The consumption economy summons a whole new way of doing business. Today, merchants are testing out subscription services. They have sufficient reasons to test out the latest trend: Subscription services can help reduce product returns, help businesses identify what customers want, and turn erratic shoppers into regular customers.
Here are three ways for merchants to make the most of this trend

  • Gen Z Prefer Personalization – Customize the offerings

    44% of Gen Z do not mind sharing their personal data to enable a more personalized experience.

    Merchants need to address customers’ practical needs and promise added simplicity. Strong customer relationships are at the heart of the consumption economy. Sustainable recurring business revenue growth cannot be achieved without customer relationships.

    For many businesses, customer data provides a good way to understand and meet their customers’ demands.

    By evaluating customer behavior and enormous troves of reviews and feedback, businesses can quickly modify their offerings and digital presence to better suit the customer requirement. Not only can businesses leverage customer data to enhance customer experiences as a whole, but also to make insightful decisions on an individual level.
    A stable, happy customer base is significant to compound growth in the consumption economy.

  • Gen Z are Price Conscious – Craft a winning pricing strategy

    89% of Gen Z consider themselves price-conscious shoppers.

    One of the arduous challenges merchants operating a subscription business face is how to identify suitable pricing strategies. Subscription model businesses need to quickly reiterate on pricing models to maximize subscriber acquisition and market share. The one-price-fits-all doesn’t work, as this method turns down, down-sell opportunities, and leaves money on the table from active users.

    Did you know that after a price rise, in 2019, Netflix lost 126,000 U.S. subscribers!

    If a business charges too much for a product/service, it won’t attract many customers. However, if one undervalues the product, the business might not cover the operating costs. Additionally, if customers are undercharged, they may presume you have a lower quality offering than your competitors.
    It is critical to provide pricing that customers find suitable for the perceived value of the products/services the merchants are selling. Customers zero in value for elements like usage, brand credibility, flexibility, cost certainty, and content.
    Billing strategy forms an integral part of the product experience – a crucial aspect for a successful subscription. Billing must be precise, simple to understand, and branded suitably. The billing system incorporated must efficiently manage several data points required to calculate bills clearly and precisely.
    Billing must be seen as the first real step towards establishing a transparent, long-lasting consumer relationship.

  • Gen Z Care about Convenience – Provide control to them
    Managing the phases of a customer’s lifecycle is instrumental in providing a compelling customer experience. Merchants must give customers complete control over their use of the product/service. Letting customers opt-in and out of services leads to better revenue and lower churn.
    Modifications (upgrade, downgrade, cancellation, pause), renewals, and suspension logic must be supported to enable customers’ flexibility. Businesses must provide automated renewal functionality that makes sure no revenue is lost.

The Bottom Line

The social conversation around the consumption economy and subscription models makes one thing crystal clear: This emerging micro-industry is here to stay. The discussion is growing, customer sentiment is high, and innovative businesses continue to enter the market.

So, what is next for the consumption economy? And what does it mean for merchants? There are, definitely, no simple answers to these questions, but by utilizing the social data, it is workable to draw some fascinating conclusions.

As a merchant, you are most likely used to concentrating on products. In the old world, it all boiled down to maintaining the bottom line, acquiring customers, billing for one-time transactions, or shipping the products. In contrast, in the consumption economy, it is not just about maintaining the bottom line. It is rather about delighting your customers and guiding them through their subscription journey. As today’s customers search for ‘outcomes, not ownership,’ merchants should be looking for customer satisfaction, not just sales.

So, how do you achieve that? Well, that relies on the products in your bucket and your customers. Essentially, the consumption economy is all about offering your customers the products that best suit them. Not essentially the best, the cheapest, the most expensive, or the most innovative, but just the ones that suit their requirements.

To do this, merchants need to better understand their customers than they ever did in the product economy. They need to have precise data on who utilizes their services and why. They need to understand what their customers want and expect from them, and they need to walk the extra mile to give the best to them. Because, if you don’t, your competitor will, and you’ll lose your business.

This generation of Gen Z is highly time-bound but resourceful and is increasingly gravitating towards convenient, fast, and seamless shopping and payment experiences. Customer convenience is no more about having surplus options; it’s all about getting appropriate, curated products and services at the right time and place.

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