Retail at a crossroads

Digital technologies, pandemic-induced isolation, as well as existential and climate-related dread have rendered Gen Z a uniquely lonely generation. It’s contributed to what Bloomberg Opinion columnist Allison Schrager dubs the “Introvert Economy”—which has induced a steady decline in the frequency, timing, and duration of peoples’ experiences with and around others. 

source: Bloomberg

Schrager uses these findings to predict that many brick-and-mortar spaces, such as restaurants and bars, will have to invest in delivery and technologies to stay afloat. But it’s worth taking these predictions with a grain of salt. Other fora for socialization have seen a resurgence. Malls have rebounded in some parts of the country, buoyed by Gen Z and their demand for instantaneity and a hunger for third places, which are in dwindling supply. 

“When you think about Gen Z and how they use the space, it gives them another opportunity to choose this space as their place to go for a night out,” said Louis Schillace, Senior General Manager of a Westfield mall in Los Angeles. 

Online retailers have no doubt been paying attention to this growing trend. For one, digitally focused retailers may feel some relief knowing that successful brick-and-mortar retail efforts may hinge on extensive capital investment. The malls that have failed to invest in refurbishment haven’t matched consumer tastes; many have shut down. 

But there’s reason for online retailers to be intimidated by some physical stores’ boom times. For one, Gen Z is uniquely apprehensive about the further encroachment of technologies into their everyday lives, which risk compounding their sense of isolation and alienation. That reality helps explain astoundingly tepid responses to initiatives like the metaverse. It also contextualizes recent research from FIS, which found notably high rates of mistrust among Gen Z consumers regarding the use of generative AI in financial services. Notably, 42% of these respondents said they would prefer to interact with human financial services professionals over a digital, automated counterpart. 

“There could be drones that deliver things to us,” said Stephanie Tully, Assistant Professor at the University of Southern California’s Marshall School of Business. “Who knows what is going to transform with AI? But one thing you will not be able to have [delivered] are those [in-person] types of experiences.”

With 76% of Gen Z consumers in the US thinking that generative AI is overhyped, it’s no surprise, then, that retailers like Walmart have shuttered their innovation labs. Of course, Walmart has an extensive physical footprint; rather, this operational move suggests that Walmart sees technological efforts as a company-wide effort, rather than a lab-only drive to club digital and physical retail experiences together. Technological innovation alone doesn’t win over Gen Z and other consumers. 

In the coming months, we may see more retailers abandon their more far-fetched digitization efforts—things like the metaverse—and double down on physical locations as well as hybridized sales models. Introverts or not, consumers continue to approach in-person commerce as a productive, social, and non-fungible practice.