Gen Z Trends That Could Disrupt Markets

Our analysts Adam Jonas and Alex Straton discuss how tech-savvy young professionals are influencing retail, brand loyalty, mobility trends, and the broader technology landscape through their evolving consumer choices.

 

Read more insights from Morgan Stanley.

----- Transcript -----

Adam Jonas: Welcome to Thoughts on the Market. I'm Adam Jonas, Morgan Stanley's Embodied AI and Humanoid Robotics Analyst. 

Alex Straton: And I'm Alex Straton, Morgan Stanley's U.S. Softlines Retail and Brands Analyst. 

Adam Jonas: Today we're unpacking our annual summer intern survey, a snapshot of how emerging professionals view fashion retail, brands, and mobility – amid all the AI advances.

It is Tuesday, August 26th at 9am in New York.

They may not manage billions of dollars yet, but Morgan Stanley's summer interns certainly shape sentiment on the street, including Wall Street. From sock heights to sneaker trends, Gen Z has thoughts. So, for the seventh year, we ran a survey of our summer interns in the U.S. and Europe. The survey involved more than 500 interns based in the U.S., and about 150 based in Europe. 

So, Alex, let’s start with what these interns think about fashion and athletic footwear. What was your biggest takeaway from the intern survey? 

Alex Straton: So, across the three categories we track in the survey – that's apparel, athletic footwear, and handbags – there was one clear theme, and that's market fragmentation. 

So, for each category specifically, we observed share of the top three to five brands falling over time. And what that means is these once dominant brands, as consumer mind share is falling – and it likely makes them lower growth margin and multiple businesses over time. At the same time, you have smaller brands being able to captivate consumer attention more effectively, and they have staying power in a way that they haven't necessarily historically. I think one other piece I would just add; the rise of e-commerce and social media against a low barrier to entry space like apparel and footwear means it's easier to build a brand than it has been in the past. 

And the intern survey shows us this likely continues as this generation is increasingly inclined to shop online. Their social media usage is heavy, and they heavily rely on AI to inform, you know, their purchases.

So, the big takeaway for me here isn't that the big are getting bigger in my space. It's actually that the big are probably getting smaller as new players have easier avenues to exist. 

Adam Jonas: Net apparel spending intentions rose versus the last survey, despite some concern around deteriorating demand for this category into the back half. What do you make of that result? 

Alex Straton: I think there were a bit conflicting takes from the survey when I look at all the answers together. So yes, apparel spending intentions are higher year-over-year, but at the same time, clothing and footwear also ranked as the second most category that interns would pull back on should prices go up. 

So let me break this down. On the higher spending intentions, I think timing played a huge role and a huge factor in the results. So, we ran this in July when spending in our space clearly accelerated. That to me was a function of better weather, pent up demand from earlier in the quarter, a potential tariff pull forward as headlines were intensifying, and then also typical back to school spending. 

So, in short, I think intention data is always very heavily tethered to the moment that it's collected and think that these factors mean, you know, it would've been better no matter what we've seen it in our space. 

I think on the second piece, which is interns pulling back spend should prices go up. That to me speaks to the high elasticity in this category, some of the highest in all of consumer discretionary. And that's one of the few drivers informing our cautious demand view on this space as we head into the back half. 

So, in summary on that piece, we think prices going higher will become more apparent this month onwards, which in tandem with high inventory and a competitive setup means sales could falter in the group. So, we still maintain this cautious demand view as we head into the back half, though our interns were pretty rosy in the survey. 

Adam Jonas: Interesting. So, interns continue to invest in tech ecosystems with more than 90 percent owning multiple devices. What does this interconnectedness mean for co