NRF Consumer Panel: Gen Z Disrupting Retail Supply Chains – What to Expect in 2025
By Carsten Krause, January 15, 2025
The retail landscape is undergoing a seismic shift as Gen Z—the digital-first generation—steps into their prime spending years. Their preferences, shaped by a blend of digital fluency, social consciousness, and aesthetic awareness, are revolutionizing how retailers approach the market. Unlike previous generations, Gen Z’s expectations go beyond basic transactions; they demand experiences that are immersive, personalized, and seamlessly integrated across digital and physical spaces. In a time where trends evolve overnight and consumer loyalty hinges on meaningful engagement, understanding and catering to Gen Z isn’t just an opportunity—it’s an imperative.
In this article, we’ll explore how Gen Z’s shopping habits, focus on aesthetics, and preference for personalization are reshaping the industry. We’ll dive into the impact of micro-trends, visual search technology, and their distinct approach to returns and purchases, offering actionable insights for retailers looking to stay ahead in 2025.
The Gen Z Shopping Mindset: A Blend of Aesthetic, Functionality and Drama
Unlike previous generations, Gen Z prioritizes aesthetics and personalization in their shopping experiences. Growing up in an era dominated by social media platforms like Instagram, TikTok, and Pinterest, they are accustomed to visually-driven content that aligns with their individual styles and values.
Retailers are responding by curating immersive and visually appealing shopping experiences. From in-store displays that resemble Instagram feeds to websites that use AI to recommend hyper-personalized products, the focus is on creating a “wow” factor that resonates with Gen Z’s identity-driven approach. As Kelly Peterson, Director of Consumer Products Marketing at Pinterest, noted during the NRF Consumer Panel, “Gen Z is all about curation and discovering themselves through aesthetics. They come to Pinterest to explore visual trends and build their unique identities.”
Micro-Trends: Small Movements, Big Disruption
Micro-trends, such as “core” aesthetics (think Cottagecore or Normcore), dominate Gen Z’s fashion and lifestyle choices. These trends often emerge from niche online communities and rapidly gain traction through social media. Retailers must stay agile, leveraging tools like social listening and influencer collaborations to capture these trends before they fade.
For instance, in 2024, the “Nicor” trend—a mix of nostalgia and futuristic design—gained popularity among Gen Z consumers, leading to significant spikes in related product searches on platforms like Pinterest and TikTok. Kelly Peterson highlighted, “Pinterest saw a surge in users exploring new aesthetics and personalizing their feeds to reflect their individuality. This exploration is a core driver of engagement and conversions.”
Visual Search: Revolutionizing Discovery
Gen Z shoppers are visual explorers. Traditional keyword-based searches often fail to capture their nuanced preferences. Visual search tools—like those offered by Pinterest—allow users to find products based on images, rather than text.
“The future of search is evolving,” said a panelist from the NRF session. “It’s no longer about typing words into a search bar. Instead, we’re inviting people into an image and allowing them to visually explore products.” For example, a shopper might upload a photo of a jacket they love and instantly discover similar styles across various price points. This technology not only enhances the shopping experience but also drives conversions by meeting Gen Z’s demand for instant gratification and personalized recommendations.
The Returns Challenge: Convenience Meets Sustainability
Returns have become a critical touchpoint in Gen Z’s shopping journey. A seamless returns process is no longer a “nice-to-have” but a necessity. According to recent studies, nearly 50% of Gen Z shoppers avoid retailers with cumbersome return policies.
Panelists at the NRF event underscored this point: “We’ve seen that returns are no longer just a backend operation; they are central to the overall customer experience,” said a representative from Happy Returns. “Retailers who fail to deliver seamless, free returns risk losing customer loyalty.” Retailers are investing in AI-powered tools to reduce return rates by improving product recommendations and size guides. Additionally, innovations like drop-off return hubs and instant refunds are enhancing convenience while addressing environmental concerns.
Bracketing: A Supply Chain Challenge
A notable behavior among Gen Z consumers is “bracketing,” where shoppers purchase multiple sizes or variations of a product with the intention of keeping one and returning the rest. This practice, while convenient for consumers, poses significant challenges for retailers. It can distort inventory levels, inflate return volumes, and increase operational costs.
To address these challenges, retailers are exploring new business models and technologies. Implementing AI-driven sizing tools can help reduce the likelihood of bracketing by providing more accurate fit recommendations. Additionally, offering virtual try-on experiences through augmented reality can assist customers in making more informed purchasing decisions, thereby reducing the need for bracketing.
Gen Z’s Influence on Omnichannel Retail
While Gen Z enjoys the convenience of online shopping, they also crave the social and sensory experiences of physical stores. In-store visits are seen as opportunities for exploration and inspiration. “We’ve noticed a resurgence in physical store traffic, especially among Gen Z shoppers who value the tactile and social aspects of shopping,” shared a panelist at the NRF event.
Smart fitting rooms equipped with AR mirrors, mobile apps offering real-time personalized recommendations, and seamless integration between online and offline channels are becoming standard features in forward-thinking retail spaces.
Gen Z’s retail behaviors and their implications for the industry:
1. Gen Z’s Preferred Shopping Channels
This chart illustrates the distribution of Gen Z’s shopping preferences across various retail channels, highlighting their inclination towards both online and in-store experiences.
Executive Insight:
Gen Z exhibits a diverse shopping pattern, balancing between online convenience and the tactile experience of physical stores. Their significant patronage of discount and off-price retailers indicates a value-conscious mindset, while their engagement with specialty and thrift stores reflects a desire for unique and personalized products. Retailers should adopt an omnichannel strategy that integrates seamless online platforms with engaging in-store experiences to cater to this generation’s multifaceted preferences.
2. Factors Influencing Gen Z’s Online Shopping Decisions
This chart presents the key factors that Gen Z consumers consider important when shopping online, emphasizing the aspects that drive their purchasing decisions.
Executive Insight:
Efficiency and convenience are paramount for Gen Z when shopping online. Features like streamlined checkouts and rapid shipping significantly enhance their shopping experience. Additionally, the expectation of free returns underscores the importance of flexible return policies. Retailers should focus on optimizing website usability, ensuring swift logistics, and implementing customer-friendly return processes to meet these expectations.
3. Gen Z’s Engagement with Social Media for Product Research
This chart showcases the social media platforms that Gen Z utilizes for product research, reflecting their digital engagement and the influence of these platforms on their purchasing behavior.
Executive Insight:
Gen Z’s reliance on platforms like YouTube and Instagram for product research highlights the critical role of visual content in their decision-making process. The growing influence of TikTok, despite its lower percentage, indicates an emerging trend towards short-form video content. Brands should invest in creating engaging and informative visual content across these platforms, leveraging influencer partnerships and user-generated content to effectively reach and resonate with Gen Z consumers.
Addressing the Elephant in the Room: the Evolving Social Commerce Landscape Amid Potential TikTok Ban or Acquisition
As the U.S. government deliberates on the future of TikTok, including potential bans or mandated divestitures due to national security concerns, the social commerce ecosystem stands on the brink of significant transformation. TikTok has been instrumental in popularizing social commerce, particularly among Gen Z consumers, by integrating seamless shopping experiences within its platform. The platform’s unique algorithm and engaging content have enabled even micro-influencers to monetize their followings effectively.
Impact of a Potential TikTok Ban
A ban on TikTok in the U.S. would have profound implications:
- Revenue Redistribution: TikTok’s projected U.S. advertising revenue, estimated to reach $12.8 billion by 2025, would likely be redistributed among competitors such as Meta’s Instagram, Musk’s X and Alphabet’s YouTube. These platforms may capture up to 80-90% of the displaced ad spend. MarketWatch
- Creator Economy Disruption: Content creators who have built substantial followings and income streams on TikTok would face significant setbacks. The platform’s unique algorithm has been pivotal in helping creators reach and engage audiences effectively. WIRED
- Social Commerce Regression: TikTok Shop has played a crucial role in democratizing social commerce by enabling creators with as few as 1,000 followers to sell products directly through the app. Its removal could stall the growth trajectory of social commerce in the U.S., which was projected to surpass $100 billion by 2025. eMarketer
Potential Acquisition Scenarios
If TikTok’s U.S. operations are acquired by an American company, several outcomes are possible:
- Algorithm Overhaul: Prospective buyers, such as entrepreneur Frank McCourt, have expressed intentions to modify or replace TikTok’s algorithm to enhance user data privacy and control. Such changes could alter user engagement dynamics and the platform’s effectiveness for social commerce. The Times & The Sunday Times
- Market Stability: An acquisition could mitigate disruptions to creators and businesses reliant on TikTok by maintaining the platform’s availability and operational continuity in the U.S. market. The Times & The Sunday Times
Strategic Considerations for Brands and Creators
In light of these uncertainties, brands and creators should:
- Diversify Platforms: Establish a presence on alternative platforms such as Instagram Reels, YouTube Shorts, and emerging apps like Xiaohongshu (Red) and Lemon8 to mitigate risks associated with platform-specific dependencies. Vogue Business
- Adapt Content Strategies: Tailor content to suit the unique features and audiences of each platform, recognizing that strategies effective on TikTok may not directly translate to others.
- Monitor Regulatory Developments: Stay informed about policy changes and legal proceedings that could impact platform accessibility and compliance requirements.
The potential ban or acquisition of TikTok underscores the volatility inherent in digital platforms and the necessity for agility in social commerce strategies. By proactively diversifying and adapting, brands and creators can navigate these challenges and continue to engage effectively with their audiences.
The Path Forward: Adapting to Gen Z’s Expectations
To succeed in 2025, retailers must prioritize:
- Personalization: Leverage AI and data analytics to deliver tailored recommendations that resonate with individual shoppers.
- Agility: Stay ahead of micro-trends by monitoring social media and engaging with influencers.
- Sustainability: Implement eco-friendly practices that align with Gen Z’s values.
- Seamlessness: Ensure frictionless experiences across all touchpoints, from discovery to returns.
CDO TIMES Bottom Line
Gen Z isn’t just reshaping retail; they’re redefining the very nature of consumer engagement. Their demand for visually-driven discovery, seamless omnichannel experiences, and eco-conscious practices is a clear directive for retailers to innovate or risk obsolescence.
As the NRF panelists emphasized, it’s no longer enough to offer great products. Success in 2025 hinges on creating a retail ecosystem that aligns with Gen Z’s values, celebrates their individuality, and delivers on their expectations for speed, personalization, and sustainability.
Actionable Insights for Retail Leaders:
- Invest in Visual Search and Discovery Tools: Enhance your online platforms with AI-powered visual search capabilities to cater to Gen Z’s preference for image-driven shopping experiences.
- Embrace Micro-Trends Rapidly: Build agile processes that allow your team to monitor and act on emerging trends quickly. Engage influencers and leverage user-generated content to amplify reach.
- Prioritize Seamless Omnichannel Integration: Ensure consistency between online and in-store experiences. Technologies like AR mirrors and real-time app recommendations can bridge the gap effectively.
- Streamline the Returns Process: Make returns effortless with AI-driven sizing tools, convenient drop-off points, and instant refunds to build customer loyalty.
- Focus on Sustainability: Incorporate eco-conscious practices into your supply chain and marketing to resonate with Gen Z’s environmental
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