Contrary to common belief, Gen Zs and Millennials would rather do their grocery shopping the good-old-fashioned way—at the store, rather than online—according to new research from the USC Marshall School of Business and FMI-The Food Industry Association.
Surprising findings include:
- Gen Zs (18-24) spend an average of $760 per month on food with $550 or 72 percent of the total on groceries (and 28 percent on restaurants and take out). Only $85 per month or 15 percent goes toward purchasing groceries online.
- Similarly, Millennials (25-39) spend an average of $874 per month on food with $615 or 70 percent on groceries (and 30 percent on restaurants and take out). Only $157 per month or 26 percent goes toward purchasing groceries online.
“There is opportunity here,” said Diane Badame, program director of the MS in Marketing Program and professor of clinical marketing, Marshall School of Business. “Groceries dominate food spending for Gen Zs and Millennials, yet nobody was talking about them. The Baby Boomers, who used to be the most profitable customer, are retiring, and we needed to look at Millennials and Gen Zs.”
“You have to constantly look at the changing needs of segments that are going to be your future most profitable customers.” —Diane Badame, professor of clinical marketing and program director, MS in Marketing.
Badame and her research team—FMI Marketing Director Steve Markenson and three USC Marshall MBAs: President of the Graduate Marketing Association Elizabeth Cruz MBA ’20, Emily Chou MBA ’20 and Elena Sakovsky MBA ’20—were the first to investigate the grocery buying habits of these generations. They were surprised by the results.
It turns out online is not the primary channel for Gen Z and Millennial shoppers because 59 percent of Gen Zs and Millennials like or do not mind grocery shopping; only 10 percent said they prefer not to shop and do it out of necessity.
“Kroger, Albertsons, Safeway, all the grocery chains, are trying to figure out how to compete and not go under because of Walmart, Target and Amazon,” Badame said. “Well, we found there’s a light at the end of the tunnel, and that is their customers love the experience of grocery shopping.”
What do they love about it? According to the findings:
- They have control over what they buy, testing the ripeness of that avocado, for instance, before it goes in their cart. It’s OK to buy pet food, shampoo or paper towels online, but Gen Z and Millennials prefer to test the freshness of their fruit, meat and bread. This autonomy is such a meaningful factor that most respondents rated this as their favorite part of in-store grocery shopping (71 percent).
- They like discovering new products as they browse the aisles (56 percent).
- Overall, they find the experience relaxing (41 percent).
Saving Time and Money
The research began with 12 focus groups, six on the USC campus and six on the East Coast. The researchers then fielded an online questionnaire to 3,000 participants, 2,000 of whom were Millennials and 1,000 Gen Zs.
What was no surprise is that Gen Zs and Millennials want to save time and money. Value, low prices, a clean store, and high-quality produce and meat are most important in a grocery store.
Generally, both generations find online shopping easy, convenient (saves travel time) and fast. But they don’t like to waste time scrolling through 16 pages of products to find the ketchup they want. And they don’t want to pay high delivery fees and wait for their groceries. Again, losing control over choosing their produce and other fresh foods was a major factor in their preference for in-store shopping.
“A pain point is affordability,” Badame said. “That is why more Millennials shop online than Gen Zs. But even so, what’s really becoming popular is order and pick up at store—curbside delivery is hot right now.”
Millennial moms, in particular, find that convenient. “If someone can pick up all her items, put them in her trunk, and there’s no delivery charge, that’s the best of all worlds,” Badame said. “That’s where the growth is.”
Omnishopper is the key word in the future of grocery shopping. “Grocers need to accommodate customers’ needs in whatever channel they prefer to shop for a given product,” Badame said.
Both generations prefer to buy fresh, refrigerated, frozen or prepared food in-store, while they purchase non-food products online. However, Gen Zs prefer to shop in-store for snacks, canned foods, condiments and coffee, while Millennials purchase these products online.
Loyalty programs are also important. “Grocers really need to have a loyalty program and use data analytics to personalize and customize the shopping experience to better compete with Amazon and Walmart,” Badame said.
However, young people don’t participate in loyalty programs as readily. “As people become older or enter a new life stage, like getting married, having children or both, they are more likely to be a part of a grocery store loyalty program,” Badame said.
With each life stage, the loyalty grows—from 49 percent of Gen Z consumers to 58 percent of single Millennials without children to 61 percent of single Millennials with children to 64 percent of married millennials without children to 70 percent of married Millennials with children.
A Lasting Partnership
The results of this research are the product of a collaboration between USC Marshall and the Food Industry Association.
This first-ever collaboration came about after an industrial relations specialist completed Marshall’s Food Industry Executive program in spring 2019. She contacted Cynthia McCloud, director of Food Industry Programs at the Marshall School of Business with the idea, and Badame, who started her career in market research with the Pillsbury Company, ran with it, starting last summer.
In January, Badame and her team presented their findings at the FMI Midwinter Conference in Scottsdale, Ariz., attended by 1,123 food industry representatives, including CEOs from independent grocery chains across the United States and Canada, big brands like Mars, Coke and Pepsi, and consultants from Deloitte, EY, McKinsey and Nielsen. The results of the research study were presented four times, including twice with the MBA students.
The partnership has proven fruitful, said Badame. “The response was incredible. And our students got job offers left and right.”
She hopes to conduct research on buying trends annually, she said.
“You have to constantly look at the changing needs of segments that are going to be your future most profitable customers.”