Beixi Li, Guest Correspondent
Retailers and brands have changed the very fundamentals of how they do business to cater to the Millennial generation. But who is this Millennial consumer? What makes their shopping behaviors so different from previous generations?
Let’s first take a look at the numbers to understand the true scale and impact of Millennials:
Age: In 2017, people between 17 – 37 years old (Born 1980 – 2000)
Total Population: 92 MM in the US – the biggest generation in US history
Spending Power: $600 Billion each year – estimated to grow to $1.4 Trillion or 30% of total US retail sales by 2020
The biggest generation in US history will soon reach prime spending years. Let’s take a look at the five behaviors that characterize Millennial buying habits:
- More than Ever, it’s about Price
Millennials are more concerned about price and less concerned about quality than previous generations, impacting business expectations and decisions throughout the supply chain. Retailers target more price-effective products. Manufacturers focus on minimizing costs. Suppliers, in turn, feel the pressure to manage material costs.
- Technology as a Way of Life
Looking around at our communities today, it’s no surprise technology has become the new norm. Having grown up in this world of technology, Millennials are more likely to try new technologies than other generations and to adopt those tools as parts of their routines. With this generation of extremely tech-savvy consumers, two trends govern technology as a way of life for the Millennial:
Mobile as the primary way to connect to the Internet.
89% of Millennials use mobile, whereas 75% use laptops and 45% use tablets.
67% prefer to shop digitally versus in-store.
41% browse at-shelf only to shop online for the lowest price.
As mobile becomes the primary means of engaging with online content, Millennials are able to access content virtually anywhere, at any time. Pre-purchase, at-shelf, at-check-out, post-purchase – the Millennial is constantly comparing products they see in front of them to products they could be buying on the internet. This tendency to instantly compare and contrast brings retailers in closer competition to all businesses that sell, be it online or brick-and-mortar. And as previously mentioned, purchase decision often hinges on price.
Social media as a critical source of information and factor in decision-making.
Millennials, above all previous generations, use social media to influence purchase decisions. They tap their social networks to read reviews, find new products and discounts, and share opinions on products purchased. A retailer is subject to not just the message it delivers to consumers, but also to the message its consumers deliver. As a result, many retailers and brands have taken to engaging consumers on their own turf by entering social media. To win the game, you have to play the game.
- Authentic, Personalized Experiences
Now that Millennials are subject to hundreds of thousands of messages from different retailers at all times, they want more than mass messaging. They want personalized messages customized to specific consumer concerns and they want those messages to be honest and authentic. Brands like Pepsi, for example, have experienced the social media backlash that can occur when consumers pick up on inauthentic messaging. Pepsi took down its controversial commercial with Kendall Jenner days after launch following immediate and overwhelming criticism from social media.
For retailers, the Millennial quest for customized material goes beyond direct messages. They are looking for tailored, customer-centric experiences. Shopping needs to become a multi-media entertainment experience. Shopping malls are a prime example of where this has already started taking place.
Historically, malls have relied on department stores to attract consumers. The decline in traditional shopping has directly impacted department stores, such as Macy’s, who reported a 40% decline in retail sales this year so far. As Millennials turn to experiences, malls are responding. Many have begun partnering with recreation and entertainment tenants in spaces previously owned by large department stores. These tenants offer activities different from movie theaters and restaurants and can include indoor climbing, bowling, playgrounds, and comedy shows. Providing this kind of experience, one that can’t be easily simulated online, is bringing more consumers back, and often for longer periods of time. Pyramid Management Group, owner of 15 malls nationwide and of Destiny USA, reports consumers spending more than 6 hours in the mall after it remodeled to provide a host of entertainment options.
- Faster, More Convenient Interactions
Millennials want things faster, with more flexibility, and without compromising on quality. As a result, there has been a proliferation of high-end fast food chains, online delivery, and fast fashion. Driving this expectation for faster service are Millennials’ quickly changing wants and needs. As Millennials come into peak purchasing power years, their changing consumption habits will require retailers to pivot quickly in order to meet changing demands. As a result, efficiency in production and operations will be essential throughout the retail industry as companies attempt to meet the quickly changing demands of Millennials.
- Lower Incomes Encourage Shared Services
Millennials have lower employment levels and smaller incomes compared to previous generations, causing them to postpone major purchases such as houses and cars and pushing them into shared services like Uber and real estate renting. But it’s more than just the large purchases that see this trend, smaller items such as music, movies, and clothes are also increasingly consumed through shared services such as Spotify, Netflix, and Rent the Runway. This trend among Millennials has moved businesses toward models that encourage access to assets without committing to ownership.
As Millennials grow into their peak purchasing period in the next few years, their behaviors will continue to disrupt and change the landscape of retail and shopping. Agile companies who respond quickly to changing demands from price to messaging may be able to ride this new wave of consumption and grow with Millennials. New businesses who take advantage of the opportunities in technology, experiential activities, and shared services may find even greater potential as the Millennial generation sets the tone for future generations. The biggest generation in US history will continue to dictate retail trends, and only those who continue to monitor those trends will earn these Millennials as consumers.
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