**The Social Spending Crisis Among Millennials and Gen Z: Navigating Consumer Discretionary Sector Opportunities and Risks**

In 2025, the consumer discretionary sector is undergoing a seismic shift, driven by the spending habits of Millennials and Gen Z. These generations—shaped by economic turbulence, digital immersion, and a culture of FOMO (fear of missing out)—are redefining what it means to “spend” in a post-pandemic world. For investors, this presents both tantalizing opportunities and sobering risks.

The New Consumer Landscape: FOMO, Digital Commerce, and Value-Driven Spending

Gen Z and Millennials are not just consumers; they are curators of experiences and arbiters of value. Their spending behavior is characterized by a paradox: splurging on experiences while tightening belts on essentials.

• FOMO-Driven Consumption: 69% of consumers globally report that FOMO influences their purchasing decisions, directly driving a 60% surge in sales for brands leveraging limited-time offers and social proof. For example, TikTok Shop's Gen Z user base outside China grew by 14% in 2025, as real-time trends and peer recommendations fuel impulsive buying.
• Digital-First Priorities: 32% of Gen Z in the U.S. use mobile devices to shop weekly, and 27% make purchases via smartphones. Platforms like Instagram Shopping Bag and Apple Pay (used by 60% more Gen Z than the average American) are becoming non-negotiable touchpoints for brands.
• Value-Driven Trade-Offs: While 51% of Gen Z prioritize price when buying household goods, they are willing to pay a premium for convenience and sustainability. However, this premium is shrinking: eco-friendly product willingness to pay dropped 15% in EU5 markets since 2020, signaling a shift toward “cost-conscious sustainability.”

Opportunities in the Consumer Discretionary Sector

1. Resale and Circular Economy Platforms
   Gen Z's embrace of secondhand goods is creating a $1.2 trillion global resale market by 2025. Platforms like Depop, Vinted, and Poshmark are seeing 47% year-over-year growth in Gen Z traffic in the UK and France. Investors should consider:
2. ThredUp (TPS): A digital-first resale leader.

3. Mercari (MERCY): Expanding into NFTs and metaverse goods.
   

4. Experiential Services and Travel
   Millennials and Gen Z are prioritizing experiences over possessions. In Q1 2025, travel bookings by Gen Z surged 33% YoY, with 34% opting for solo travel. Airbnb and Expedia Group (EXPE) are well-positioned to capitalize on this trend, especially as 30% of Gen Z use social media for travel inspiration.
   

5. AI-Powered Personalization and Convenience
   Over 50% of Gen Z consider using AI for price comparisons, and 40% are open to AI-driven shopping assistants. Companies like Amazon (AMZN) and Shopify (SHOP) are integrating AI to enhance user experiences, from dynamic pricing to inventory optimization.
   

Risks to Watch: Economic Volatility and Shifting Priorities

While the opportunities are vast, investors must remain vigilant:
- Tariff Uncertainty: 43% of consumers cite rising prices as their top concern, with tariffs acting as a secondary stressor. Lower-income consumers are switching to private-label brands, while higher-income buyers delay discretionary purchases.
- FOMO Fatigue: The same FOMO that drives impulsive spending can also lead to burnout. 29% of Gen Z reported reducing nonessential spending in 2025 due to financial anxiety.
- Sustainability Fatigue: The decline in willingness to pay for eco-friendly products suggests that sustainability must be cost-competitive to retain Gen Z's loyalty.

Investment Strategy: Balancing Agility and Resilience

To navigate this dynamic market, investors should:
1. Diversify Portfolios: Allocate capital to both high-growth sectors (resale, AI-driven retail) and resilient staples (discount retailers like Walmart (WMT) or Dollar General (DG)).
2. Monitor Sentiment Indicators: Track metrics like Gen Z's engagement with BNPL services (e.g., Klarna (KLRN)) and social commerce adoption rates.
3. Prioritize Purpose-Driven Brands: Companies like Patagonia and Allbirds, which blend sustainability with affordability, are gaining traction among value-conscious consumers.

Conclusion

The “social spending crisis” among Millennials and Gen Z is not a crisis in the traditional sense—it's a transformation. By understanding the interplay of FOMO, digital-first behavior, and financial pragmatism, investors can position themselves to thrive in a market where flexibility and authenticity reign supreme. The key is to invest in brands that not only meet these generations' demands but also align with their values—whether through sustainability, convenience, or immersive experiences.

As the world moves into the second half of the decade, the ability to adapt to the ever-shifting priorities of Gen Z and Millennials will separate successful investors from those left behind. The future of consumer discretionary is not about selling products—it's about creating ecosystems of value, connection, and meaning.