Nov 18, 2022

Looks Like Gen Z Will Lead This Holiday Season’s Gift Card Surge

(This is part 2 of a discussion on 2022 holiday spending insights. For part 1, click here.)

In our previous blog, we learned how shopping trends are changing in a tough economy-consumers are starting to shop earlier to stretch out their budgets and they’re shopping for more deals. They’re taking advantage of alternative payment options, too, like digital wallets and cryptocurrency.

We also learned how gift cards, according to research from the NRF and Prosper Insights & Analytics, are the #1 preferred holiday gift for the 16th year in a row.

Everyone loves gift cards, obviously. But which group of shoppers is leading the way? Gen Z are this year’s big spenders, planning to increase their gift card spend by 57% up to an average of $290 each, compared to last year’s $185.

To learn more about what Gen Z and other holiday shoppers are up to, PaymentsJournal sat with Blackhawk Network Global Chief Marketing Officer Jay Jaffin, Blackhawk Network Senior Global Insights Manager Sarah Kositzke and Jordan Hirschfield, Director of Prepaid Advisory Service for Mercator, for a two-part discussion.

Introducing the Hybrid Consumer

The pandemic caused most of us to avoid crowds, stay at home and conduct business and errands via laptops, tablets and mobile phones. This caused a rapid adoption of all things digital, from ordering to paying to getting deliveries.

While more people are leaving the house, many of those digital behaviors have remained. This blending of both in-person and digital shopping has created a new breed of consumer-the hybrid consumer. Here’s one example of how a hybrid consumer may shop: They buy an item through a retailer’s app, then pick it up curbside or in-store. Or, maybe, they shop for items in a physical store, then have them shipped home for convenience.

Kositzke said that while hybrid shopping spans all verticals, home furnishings and groceries are among the most popular. “We’re also seeing that the younger consumer is really embracing hybrid shopping,” she added.

Roughly 27% of all consumers consider themselves hybrid shoppers. Among Gen Z, however, that figure goes up to 37%.

Kositzke added another interesting set of numbers: 55% of consumers say they shop both online and in-store, while 45% still prefer to shop in-store.

In-App Payments are Growing

One of the new options in alternative payments is using a retailer app. More and more retailers have their own apps, and more and more consumers are using them. According to Mercator research, 63% of younger consumers and about half of older consumers are motivated to make an in-app purchase.

Why? They don’t want to deal with holiday crowds. They can just order in the app, then pick up their gifts curbside or have them sent directly to the giftees.

The attraction of in-app payments comes down to convenience. The Starbucks app, for example, has been incredibly successful because consumers can pre-load a gift card in the app, enter a location and pay via their mobile device. But they also get a nice bonus-loyalty points for every purchase they make, which they can redeem for drinks, food or merchandise. And, for a brand infamous for its long lines, the app makes that inconvenience go away. They order ahead and walk right up to get their purchases.

This is something retailers should keep in mind during the holiday season. “Personally, I don’t want to go anywhere near the inside of a store during the holidays,” Hirschfield added.

He also noted that in-app purchases are made in-store, too-roughly at the same rate as out-of-store. This is another example for our new hybrid consumers: They can browse items inside a store to judge the quality, style or fit, then purchase digitally to be delivered. This is especially handy for large items like a sofa or a dishwasher.

More on Gen Z

The stars of this year’s holiday shopping season-Gen Z-are also gaining purchasing power. Born between 1996 and 2012, these 67 million consumers now make up the third largest generational segment in the U.S., and they’re also the most ethnically and culturally diverse. Like other groups, they’re planning to spend much more this holiday season.

Gen Z likes the flexibility of hybrid shopping, but they also care about what they’re shopping for. Jaffin stated they’re much more likely to be “conscious consumers,” those who look for brands and products that are supportive of social causes.

“Studies show that brands that have a perceived positive sustainability impact have grown in brand value faster than those with a low perceived impact,” Jaffin added. Gen Z especially “are looking for information about how their purchases will contribute to social and environmental responsibility.”

Jaffin noted how these conscious consumers helped inspire Giving Good cards, Blackhawk Network’s line of charitable gift cards. An industry first, 3% of the value on each card goes to the nonprofit on the card, including Habitat for Humanity, Wounded Warrior Project and St. Jude Children’s Research Hospital. Almost two-thirds (63%) of younger consumers (and 51% of older consumers) say they plan to give back to causes they care about this holiday season.

Gen Z is now the biggest user segment of gift cards in general, buying gift cards both as gifts and for self-use.

Here’s another payment trend: Younger members of Gen Z who may not have a credit or debit card are now using gift cards as a form of payment. 18% of Gen Z said they use their cash to buy gift cards, then use their gift cards to make purchases online.

Gen Z are also more likely to spend above the gift card amount, which makes gift cards “the gift that keeps on giving” for merchants, Jaffin said. He added, “More than other generations, they love shopping for fun; they love retail therapy.”

In Summation

Overall, this year’s holiday shoppers are expected to be much more strategic, seeking out the best deals and promotions and trying to buy as early as possible to avoid out-of-stocks, said Kositzke.

“Everybody is starting early, and they are keeping their eyes on the prize, looking for the best deals,” she added.

Hear it For Yourself

To hear part 2 of this PaymentsJournal podcast, click here. If you missed part 1, click here.