Generation Z are beginning to make a decisive impact on world commerce, with over 40% of US consumers now belonging to this cohort as of 2020. Last year saw global e-commerce transactions reach a record breaking 4.2 trillion dollars, with big name online marketplaces such as Amazon or China’s Alibaba consistently out-competing physical locations with their centralized format, competitive prices and sophisticated delivery infrastructure.
This trend is being accelerated by the increased spending power of members belonging to Generation Z, the adults today born after 1996. What distinguishes this generation from the Millennials before them, is that for all they share in common, Generation Z are the first group of people to have grown up entirely in a world permeated by the internet. Generation Z accordingly have much higher computer literacy, and in many cases actively seek out digital alternatives to conventional products and services, citing the uniquely on-demand focus of digital storefronts as a major draw.
As of 2020, a full 98% of all members of Generation Z own smartphones. While Millennials are not too far behind, with 92% reporting smartphone ownership, this picture diverges with preceding generations. Generation X, no strangers to working with computers, report only 79% smartphone uptake and the Baby Boomers trail with 55%. As this dividing line is so stark in the case of Generation Z and the Boomers, products and services actively pivoting away from brick-and-mortar and towards digital options can be seen as actively responding to the increasing demands of the younger internet generation.
One need only look at the success of streaming services like Netflix in recent years to see the magnitude of the sea-change away from traditional entertainment products. The same can be seen in game markets that used to be tethered to brick-and-mortar locations, such as game arcades and casinos. These have also been reorienting around providing competitive online services.
Online casinos have greater flexibility with respect to running promotions due to the nature of the digital medium. Accordingly, they are able to cater to professionals with high digital competence who expect on-demand services at their fingertips. This emergent market responds positively to the type of promotional models these platforms provide. In the case of online slots titles, offers such as free spins and daily jackpots reward new and returning players for their patronage. Globally, the online casino market is increasingly displacing physical casinos. 25% of total worldwide casino revenue now comes by way of these services.
Future analysts will look at the early 2020s as a definitive break with the past in more ways than one. In terms of how (and what) products and services are valued, this will be seen as particularly apparent with the rise of cryptocurrencies and the growth in popularity of Non-fungible Tokens, or NFTs. Since the year 2000, when Napster lost a landmark internet piracy and copyright case, global entertainment markets have been grappling with the question of how to value digital products. Whereas a physical vinyl or CD has intrinsic scarcity attached to its material form, digital products can theoretically be copied infinitely.
In the interim, the development of streaming services has effectively limited the extent of internet piracy by providing low-friction and reasonably priced alternatives. While this benefits customers and shareholders, individual content creators are losing out on the kind of revenue pre-internet creatives could expect by way of success. It’s easy to see why this is the case. On Spotify, an artist only earns $0.005 in royalties each time their song is streamed. NFTs provide one alternative solution that could empower artists.
What NFT’s offer is a viable alternative. By way of utilizing blockchain technology, they are able to retain their uniqueness and value in spite of their digital form. Kings of Leon are the first band to explore the potential of this new medium. Their latest album, When You See Yourself, is the first album ever to be released as an NFT. Buyers are treated to perks ranging from limited edition vinyl’s of the album, to front-row tickets to future Kings of Leon concerts. Other musicians, including Grimes and Gorillaz have begun experimenting with the format.
In the art world, NFTs represent the first time digital art can be valued in the traditional sense. Acclaimed digital artist Beeple sold his entire digital art library as a NFT for $69 million to a collector, rapidly propelling him to sit among the ranks of the world’s most valuable artists. As commerce increasingly pivots towards Generation Z, NFTs look set to be a perfect fit for their interests and spending habits and, accordingly, we can expect to see a huge uptake of this phenomenon as we progress into the next decade.