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If you own a retail business, you may have noticed that your customer base is not what it used to be.

Rieva Lesonsky, CEO of GrowBizMedia/SmallBusinessCurrents.com sits down with Shawn Hessinger, Executive Editor of Small Business Trends to discuss how millennial shopping habits and Gen Z shopping habits are changing retail, and how your business needs to adapt to these changing retail trends.

Check out this edited transcript of their discussion on the latest episode of Small Biz in :15. You can also check out the full conversation above or listen to it on SoundCloud below.

Shopping Habits of Millennials and Gen Z Customers

Shawn Hessinger: We’re going to talk about both e-commerce and retail, because if you think that there’s a lot of confusion on this topic with people. Customers now are not the same as they were even five years ago. They are just not doing the same things, right?

Rieva Lesonsky: There’s a whole new customer base out there. And I think that so many business owners have the wrong perceptions of the generations. You know, they think, oh, millennials are this and Gen Z is this, and they’re totally wrong. And unless they get and understand what the generations want and are doing, they will continue to lose customers.

What retailers need to be aware of online or off is Gen Z is not a bunch of kids. They’re leading, and the leading edge of Gen Z, they’re in their early to mid-twenties. So a lot of them are working, they’re starting families, they’re spending money, and they’re serious about spending money. They lived through some recessions. They understand what it’s like.

So, they’re going into adulthood with a different kind of mindset, looking at consumerism as a kind of activism — it’s their way of being activists. And so they choose who they want to do business with very carefully. They vet a lot of people and boycott a lot of businesses. But they’re looking where they’re spending their money and how much they’re spending. And they have basically unleashed this whole phenomenon of second-hand retail.

Basically, that generation of millennials started this phenomenon where secondhand is now hot. And it’s so hot that major retailers are actually making space on the floor in their stores to share used clothing and used products.

IKEA even says, “Hey, if your things are in good shape, bring them back. We’ll pay you for it.” And now they’re reselling it. So that’s a whole new phenomenon, not just in clothing, but in furniture. There’s a whole website, Cherish, that sells vintage furniture. And it’s big. We’re not just talking about dabbling. They have millions and millions of customers. So that’s a whole new mindset too.

Shawn Hessinger: How about the opposite of the generality that people above the age of 60 are never going to shop online? Or people who are younger are absolutely going to shop online and never going to step into a retail store? Because that doesn’t seem exactly accurate either.

Rieva Lesonsky: No, and I think that’s the group that led the surge back to retail. It’s because, for them, shopping is a social activity, right? They don’t go into stores themselves. They go in with a group of people. They’re trying stuff on. They’re sending pictures to other friends. It’s kind of a fun group activity. And so that group has embraced that. And so they led the charge back to the stores. So for them, fun is doing things that are pack related. And so that’s a big thing that people overlook.

Another thing: one generation that is HUGE in restaurants is Gen Z. They love to go out to eat. So many restaurant owners see some teens coming out and they’re like, “No, I don’t want you in my restaurant!” But they’re there, and they spend money.

I’m waiting for the new Taking Stock with Teen survey for the spring, but the one for this past spring shows that they’re spending money a lot of their money on food. Food is, overall for teens, the number one spend. And so, again, you want to make them comfortable. You want to, you know, make them not feel like they got to eat and run because they’re going to sit there and they’re going to just keep ordering this stuff because that’s what they do. They like to hang out. So take advantage of it!

Shawn Hessinger: The other customer behaviors that have been majorly changed over the last couple of years that small businesses should be aware of. Anything we didn’t mention?

Rieva Lesonsky: Millennials are the biggest home buyers in America. They’re having families, which means they’re buying a lot of stuff because they have a kid, and they endlessly need stuff. And so you don’t ever want to overlook the millennial market. And the millennials started, like I said, the second-hand movement, they started consumerism and activism. It’s been really embraced by Gen Z, but it was really started by millennials and what both those generations want.

And between the two of them, they make up probably half of America. I mean, millennials alone are like 85 million and Gen Z is not small. You look at those two generations, and they’re looking to do business with people who give back to the community in some way, who care about their employees.

When you’re a local business, how you treat your employees matters to your customers because somebody is going to live next door to one of your workers. Everybody’s going to know somebody who works for you and they’re going to know if you’re a good employer or a bad one. And people are going to make their judgments on where to shop based on that.

And so you want to — not only be a good public citizen — you want to talk about it. You don’t want to say, “I do this stuff, and I’m too embarrassed to say it.” But, no, you want to promote it because you want people to know that you care. And it’s not about doing it for phony reasons. It’s about being authentic about it and really caring to show that you do care about your community and that you’re participating.

It can be something as simple as holding a fundraiser for Girl Scouts. I understand small businesses have limited budgets, but there are some stores here in my area that at the holidays just have Girl Scout troops come in there to wrap gifts for free. You know, you can tip, you know, I donate to the Girl Scouts. The store gets nothing, except customers are there because, “Oh, I’m getting my gift wrapped free!” And the Girl Scouts or the Boy Scouts, or whatever that is, can make some money from it. So think about ways to interact with your community more to show that you are public-minded.

Shawn Hessinger: Anything we missed?

Rieva Lesonsky: We’re outside the realm of retail here, but if you’re in the home construction and remodeling industries or selling that kind of products…and I don’t mean the decor…I mean like sinks or, you know, plumbing devices or something…women are actually the drivers of those purchases. And I’ve read some surveys from women that say they’re the ones that actually go into the hardware store to buy the products. And yet they’re the ones who feel not respected in the hardware store by the employees, right?

Remember, I told you, millennials are buying more homes — well, it’s really millennial-led by millennial women who are actually buying a lot of the homes. So you want to make sure that you treat every one of your customers with respect.

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This article, “Rieva Lesonsky on Understanding Millennials and Gen Z” was first published on Small Business Trends