Consumer behavior is changing direction. Going to a store, be it brick and mortar or virtual, to purchase an item or product we need, paying and getting it is no longer sufficient today, to say the least. The new consumers are willing to spend more money on “what comes with it.” In other words, consumers are willing to spend on the very shopping experiences, when it can be translated into photogenic service and can be shared on social media.
Generation Z is expected to make up 25% of global income by 2030. The generation will enter the consumer revolution that brought us the digital transformation. This generation is no longer satisfied with the purchase of a product like perfume or a high-end outfit, it is a generation that wants more – a generation that wants an ongoing experience and not something that ends the minute they have completed their purchase.
The memory and ongoing experience are currently what is most highly valued by the new consumers and, therefore, social media sites have grown to be an integral part of our lives, where we share daily experiences, with many of them being consumer moments. The experiences for which consumers are expected to spend most of their money include travel, entertainment, gaming, media and food delivery.
Investors need to learn about the fields which have become the consumer experiences sought after by the young generation:
Gaming – is in second place after football in terms of popularity, with 2.9 billion people around the world subscribed to video games, more than the number of fans who watch hockey, tennis, basketball and more. The most viewed gaming tournament in 2021 was The League of Legends World Championship, with an average minute audience of over 30 million (up 30% over 2020), with close to 74 million peak concurrent viewers of the live broadcast of the tournament on YouTube and Twitch. This figure also showed 60% growth over the previous year.
To make this eminently clear, let’s recall another figure that defines the magnitude of the revolution: the turnover of the gaming industry today is estimated at about $160 billion, four times the turnover of the global film industry (which reached an all-time record, before the pandemic, at $40 billion). It is no wonder that all the tech giants (Apple, Microsoft, Google, Meta, Sony, Amazon, etc.) are investing huge sums in gaming. Just two months ago, in January 2022, Microsoft acquired one of the best-known names in gaming – Activision Blizzard – for $70 billion. It marked the largest ever acquisition in the gaming industry as well as Microsoft’s largest-ever purchase.
Online food deliveries – will continue to benefit from consumer behavior that impacts the consumption of food. We expect that the market will stabilize at two or three dominant players in each geographical region.
Social media – Facebook continues to maintain its position as the most popular platform in the US, according to UBS Evidence Lab, as 90% of the respondents stated that they use it monthly, followed by WhatsApp, YouTube and Instagram.
Advertising opportunities – Instagram continues to demonstrate the greatest involvement in advertising, measured according to users who take action while watching an advertisement and purchasing the advertised product in real time.
After years of the technology industry outperforming, 2022 started against the backdrop of the expectation of continued interest hikes and the war in Ukraine, which put a serious damper on the growth performance and technology stocks. While it is still too early to invest in technology companies in general, we certainly see opportunities with certain companies that are a good fit for long-term investors searching for exposure to technology disruptions and digital transformation. We believe that artificial intelligence, big data and cybersecurity along with areas supporting 5G will grow more quickly than the technology sector in general.
The author is Senior Relationship Manager and Deputy Desk Manager at UBS Wealth Management Israel.
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It is clarified that the authors and/or UBS Switzerland AG and UBS Wealth Management Israel have a personal interest in the subject and/or that they have the securities mentioned in the article, in accordance with the provisions of the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995.
