Erica Lopez, 31 years old, is having growing pains. \”My tastes are growing more expensive,\” admits the executive recruiter from Ann Arbor, Michigan. \”I\’m making more money and buying nicer clothes, accessories and shoes that better reflect my position in my life and career. A lot of my friends and colleagues are doing the same. We feel like we need to keep up with our peers.\”

Erica\’s situation is not surprising, according to a recently-published report from Goldman Sachs co-authored by Alexandra Walves, Jason English, Heath Terry, Matthew Fassler, Richard Evans and others. Based on a study conducted with Conde Nast examining U.S. millennial and GenZ shopping behavior and brand affinity, it found that fashion-conscious millennial women or \”It Girls,\” like Erica, who tend to be more affluent than the average millennial, have accelerated their shopping and spending on apparel, accessories and footwear in the past year, and shifted more purchases online.

Many retailers who established their businesses selling to older GenX consumers are also doing well with fashion-conscious millennials. According to the study, It Girls prefer to shop at Forever 21, H&M, Zara, American Eagle and Free People. Target came in fourth place this year, pretty impressive since it wasn\’t even in the top 10 last year.

Favorite brands among fashion-conscious women include Nike, Kate Spade, Michael Kors, Adidas, Gucci, Coach and Lululemon. Brands that have come onto the It Girl radar in the past year and are therefore important to watch include Fabletics, FashionNova and Everlane.

Millennial Muscle

It\’s no secret that millennials, consumers roughly between the ages of 23 and 38, are the most important demographic group impacting apparel and other style-driven markets today. Along with their teen- and college-age GenZ cohorts, they control almost a third of apparel spending and are the key target of fashion marketers. Their spending is expected to increase almost 40 percent in real terms over the next decade and a half as they approach their peak earning and spending years. Their unique approach to consumption, focusing on convenience, experience, authenticity, and value, is different from that of their GenX and Baby Boomer forebears.

Much attention has been paid to the millennial attraction to brands such as True & Co., Outdoor Voices and M. Gemi. But the widely-held belief that younger consumers want no part of traditional brands or retailers is just plain wrong, according to the Goldman research. These consumers, it turns out, have a penchant for many of the same stores and brands as their older GenX and Baby Boomer cohorts, including Old Navy, Levi\’s, Express, J. Crew, Puma, Wrangler, Hanes, Converse.

The top three favorite clothing brands for millennial women are Forever 21, American Eagle and Old Navy. For men, it\’s Nike, Adidas and Levi\’s.

The favorite apparel brand of It Girls, according to the research, is Victoria\’s Secret. Although the intimate apparel leader is losing ground to Aerie and Calvin Klein, its high affinity and preference rankings are evidence that the lingerie retailer will get a lot of leeway from its core customer base when it finally figures out how to fix its product and marketing issues.

It Guys

Jake T. is a 21-year-old New Yorker who still obsessively follows his favorite baseball team, but spends less time watching sports and playing video games than he used to. He\’s recently begun scoping out the job market on Indeed and LinkedIn, planning for life after college–a life that he hopes will include nicer clothing.

Jake remains a fan of brick-and-mortar shopping for clothing, preferring to try things on before buying to make sure it feels and looks good, but his store and brand preferences are evolving. His favorite brand now is Calvin Klein. \”A couple of years ago, I liked to shop in Kohl\’s,\” said the college senior matter-of-factly. \”But the product there isn\’t stylish enough for me anymore. Now I prefer shopping in Macy\’s, Lord and Taylor and Nordstrom if they\’re having a sale or my mom is paying. I really like the Alfani stuff at Macy\’s. And I have started to order clothes online more often, particularly if I can\’t find my size or color in the store or if I know the brand fits me well.\”

The more fashion-conscious men surveyed by the Goldman/Conde Nast study report J. Crew, H&M and Polo as favorite clothing brands, with Calvin Klein number one in underwear. In bags and briefcases, Coach and Herschel emerge as favorites, but Nike comes out on top for athletic bags.

The Rapid Shift Online

Most millennial and GenZ consumers gravitate toward mass market retailers. The typical millennial woman and man, according to the study, prefer to shop at Amazon, Walmart and Kohl\’s. Walmart and Kohl\’s have enjoyed double-digit e-commerce sales growth in the past year. Walmart expects its online sales to grow by 35 percent in the fiscal year beginning February 2019.

The most dramatic finding of the Goldman Sachs/Condé Nast report is the accelerated rate at which fashion shopping is moving online. Younger consumers are doing more of their fashion spending in e-commerce channels, with clothing enjoying the highest penetration. Consumers in their late 20s spend the biggest portion of their clothing spending online, close to 50 percent or more.

Amazon Accelerates

Amazon is now the most powerful online distribution channel in the U.S., having consistently gained share of the apparel and accessories market as it expands its offering across many categories. In every category surveyed, men chose Amazon as their #1 or #2 retailer. Although the most fashion-conscious had mixed reviews of Amazon, for women overall Amazon moved up from #4 last year to #1 this year.

Amazon often enters a category by leveraging third-party sellers, then scaling to attract brands into the fold while it builds private labels as low-cost alternatives to national brands.

Since 2017, the company has launched a reported 60 private label brands, mostly in apparel, footwear and accessories. Although there are many critics who say that Amazon has not yet figured out the formula for success in private label apparel, which lags far behind electronics and household products, Amazon has been moving up in the apparel preference rankings of young consumers so quickly that it is now the dominant retailer in almost every category of mainstream fashion. Although young men are more likely to name Amazon as their number one destination for apparel, women in the study gave the Seattle-based giant the top spot in clothing handbags and premium/luxury brands.

Athletic Achievement

For most young consumers, fitness a key part of their lifestyle. The importance of athletic apparel and footwear to this demographic cannot be overstated, and Nike continues to reign supreme as the number-one athletic brand across all millennial consumer segments, with Under Armour, Lululemon, Adidas and Puma also significant.

As these brands have expanded their athleisure and streetwear product lines, they are being shopped increasingly for everyday wardrobe staples, with millennial men reporting Nike, Adidas and Under Armour among their favorite clothing brands. The study found Nike ranks as the favorite clothing brand among GenZs, and first among all footwear brands (not just athletic footwear) for every consumer segment.

Under Armour, though highly ranked in athletic apparel, has had a tougher time in footwear. This might be changing, however. For the first time, Under Armour finally broke into the top 20 favorite footwear brands for young men, and came in as number 16 for GenZ.

Up Next: GenZ

Though lacking the financial firepower of their older cohorts, GenZ is already having an impact on apparel consumption. Their command of the digital and social landscape will continue to drive change in the industry. They buy the biggest proportion of their apparel online, often through social media and mobile apps. For GenZs, Snapchat beat out both Facebook and Instagram for the favorite app spot.

They are also the group that is the most eco-conscious: 19-year-old Avery I. said: \”One of my favorite places to shop is definitely Goodwill. Almost all of my sweaters, t-shirts, comfy jackets, and even a few dresses come from there. I love the uniqueness, and it\’s so rewarding to hunt for what you like.\” The environmental science major from North Carolina said she much prefers shopping in stores rather than online because \”You know immediately if something fits you or is the proper color without having to wait a week to try it on. Also, I hate all the packaging involved in online shopping; it\’s super wasteful.\”

Brands ranking very high with GenZ consumers in the study include Nike, Under Armour, UGG, Converse, Gucci, Coach and American Eagle. Next-gen lingerie brand Adore Me finished in the top 5.

Luxury Is in the Eye of the Beholder

For the first time this year, Goldman did a deeper dive into the premium space. In this category, traditional luxury brands, many of whom have hired young, edgy design directors like Alessandro Michele (Gucci) and Virgil Abloh (Louis Vuitton) to attract younger consumers, were a mixed bag. Gucci clearly came out on top for It Girls, men and GenZs. Kate Spade, Louis Vuitton, and Chanel also ranked high for young consumers, as did Polo and Prada. Conspicuously absent from the top ten are Hermes and Versace, though Michael Kors\’s acquisition of the latter might change that. Millennial women prefer Michael Kors and Coach.

It\’s interesting that men put Nike and Adidas in the number 2 and 3 spots in the luxury category! With an increase in collaborations between luxury and heritage brands, the boundaries between the segments may begin to blur.

Although it\’s tempting to generalize when talking about consumer groups, there are some significant variations within them that drive important trends. For example, the growth in ultra-high-end athleisure like $400 leggings at Carbon 38 and $700 Balenciaga sneakers indicates that even a  value-conscious customer is willing to sometimes pay top dollar for product that is special.

Social Climbing

For women and fashion-conscious men, social media platforms are becoming more important than shopping apps for new brand and product discovery and purchase. The study found that among millennial women, Facebook still ranks number-one, but Instagram, the favorite among It Girls, is gaining ground. GenZs prefer Snapchat.

Erica follows about two dozen fashion influencers, twice the number that were on her Instagram feed last year. Jake has recently begun to follow a few fitness and fashion bloggers to get style and grooming ideas. Avery follows on average three to five influencers on Instagram but also gets lots of inspiration for style ideas from Pinterest.

Established and up-and-coming apparel brands and retailers need to do more than just establish a presence on digital platforms. Social needs to be an integrated, planned and measured piece of a holistic marketing communications strategy that includes PR, digital marketing, content marketing and events.

Implications and Opportunities

Millennial and GenZ consumers are being respected for more than just their purchasing power and style influence. They are also exerting influence on others, getting them to start behaving differently, impacting commerce in a major way.

Retailers seeking ways to expand their business with millennials should focus not only on the more fashion-conscious among them, who spend more, but also on the online-loving mainstream that represents the biggest population. The fact that they love many of the same brands and stores as older consumers should be encouraging news. But they need to be met on their own turf, with youthful product, compelling branding, a sustainability story, understandable pricing strategies, social media and blogger marketing, and an enhanced online and in-store experience.

Only then will the merchants and brands capturing the attention of these challenging consumers be able to keep their interest and, hopefully, their loyalty.