The London School of Economics (LSE) has recently identified a significant shift in purchasing behaviour in their ‘Sky High Economics’ report. Much like the movement from offline to online shopping as witnessed in the last decade, the shift in buying behaviour of younger generations is bound to have an impact on marketplaces and retailers. I believe there are significant similarities we should be considering within the e-commerce shopper and the airline travel purchasers, as indicated in this report.
Within a decade, one-quarter of the world’s population will be comprised of Generation Z and ‘Next Gen’, with these cohorts accounting for around half of the population. It is forecasted that the Generation Z will become one of the largest group of online purchasers - representing about 1.2 billion buyers, where almost two-thirds of this global cohort will be made up of Asia-Pacific (APAC) citizens.
The Generation Z in this context, refers to the generation that was born between 1997-2012. Having grown up in the digital age, this generation was raised with technology, the internet and social media. Without doubt, the digital expectations of Generation Z would be habitually high and satisfying these expectation can deliver considerable rewards and prospers in a “win-win-win” for consumers, airlines and suppliers.
The airline industry predicts Generation Z will spend more on inflight entertainment, than other groups. I believe our own e-commerce industry can expect Generation Z to be more active too.
The Generation Z is a ‘deal-driven’, often impulse-buying digitally native group which embraces a ‘you only live once’ ethos. The majority of this cohort is destination-indecisive and will defer purchase decisions till the last minute. This creates an opportunity for the retailers to influence their decision through direct digital engagement, social media and personalised offers based on previous purchase history.
Being habitually last-minute spenders, Generation Z passengers across APAC will have no issues with purchasing services while on flight and are willing to splurge, and that is where the airlines can capitalie on. That being said, the success of such opportunities will only be a possible with onboard connectivity – preferably one with high speed connection, where most airlines now are either not providing, or am providing poor connection that is not up to the Generation Z’s expectations. The captive audience of airline passengers could prove to be a very attractive target group for the ecommerce marketplace.
In addition, providing onboard connectivity would complement the demands of the digital age and meet the expectations of the younger generations.
Against the backdrop of major demographic change and digital disruption, the ‘old rules’ of customer loyalty applies less. Rewards alone will not create a favourite brand. Millennials value loyalty less than any previous generation – a trend set only to continue with younger generations.
In conclusion, the airlines can make use of the behavioural shift and come up with innovative partnerships with both global and local retailers that extends the possibilities of inflight spending. The growth of Generation Z as the dominant cohort within the next decade, coupled with the retirement of older cohorts, will continue to lessen loyalty amongst passengers if no major change is made. A good example of airlines adapting to the behaviour changes is Singapore Airlines (SIA)’s KrisShop, which is a duty-free retailer, selling everything from cosmetics and fragrance to electronics and exclusive co-branded items.
Commentary by Chua Yun Qin