Lets try a quick word association game…
What’s your first reaction when you hear “millennials”?
Are you chuckling? Are you rolling your eyes? Are you fearful for the future of the world?
It’s time to get past the stereotypes and focus on the facts. Millennials number approximately 86 million Americans and will represent 30% of the total retail sales in the United States by 2020.
Is your business ready for them?
Understanding the millennial shopper
To first prepare for the millennial shopper, retailers must truly understand who these customers are and not rely on misconceptions to prepare their business for one of the largest market opportunities in modern times. And while there is significant research from some of the largest firms and institutions about millennials, that data provides very few firm conclusions that drive strategic understanding of this demographic.
However, there is high-level data that reveals three fundamental differences between millennials and previous generations that your business should keep in mind to position itself successfully to attract this market segment.
1. Millennials are the most educated generation in history.
Studies reveal that 6 in 10 have a four-year bachelor’s degree, 1 in 10 have a masters or Ph.D. degree, and 1 in 4 is currently enrolled as a full-time student at a university or college. No wonder millennials prefer to feel informed and empowered when making shopping decisions! And it’s no coincidence that thorough rating and review systems are prominent features on today’s most successful e-commerce sites, such as Amazon.
2. Millennials are ethnically diverse.
According to the Pew Research Center, millennials are significantly more diverse than previous generations. As millennials marry outside of their own ethnicities and have more mixed-race children, this increasingly complex melting pot significantly impact preferences in fashion, food, and consumer goods. It’s no longer as simple as having a Hispanic grocery aisle in areas with large Hispanic populations. Millennials prefer variety – regardless of ethnicity – and are influenced and appealed by more fusion approaches in retail.
3. Millennials’ spending profile and ability are vastly different.
Educated millennials currently hold $1.2 trillion in student debt, due largely in part to tuition costs that have risen 500% since 1985. Understanding that disposable income and the ability to make large home, furniture, and car purchases are dampened by student loan debt, retailers should consider flexible payment methods (such as monthly subscriptions and “renting” luxury items) and credit-friendly, no-interest plans to appeal to millennial shoppers.
Adapt or Die
With this knowledge, retailers can adapt their businesses and be successful with this largest shopping segment by 2020. But first, they must adopt three fundamental components in their strategy to attract and retain millennial shoppers.
1. Wow customers digitally.
Millennials are exposed to more technological advancements then ever before. A retailer cannot ignore this fact and must wow its customers with technology to keep them happy and engaged. Under Armour, for example, has been very successful in harnessing a connected fitness community and is now beginning to integrate technology with apparel.
2. Spend radically more on the in-store experience.
Going to a physical retail store is no longer a necessity for millennials – it’s a choice. Successful retail is about the new definition of the in-store experience and omnichannel touch points throughout the journey. For instance, Apple mastered its in-store experience with a revolutionary store design, Genius Bar associates, and the embodiment of fanatical loyalty whenever a new product is released. Plus, Urban Outfitters acquiring a pizza chain is only just the beginning of the need for novel approaches to driving store traffic with millennials.
3. Empower the customer.
Respect the educated customer and equip them with decision-making tools that will make their shopping and customer experience more convenient and complimentary. Even integrating millennial shoppers to develop and test your products could be very effective. Uber is a model example of how to allow customers to choose by integrating technology, convenience, ratings, variety, and speed to make going from Point A to Point B more satisfying, cheaper, and catered to the segment of one.
By taking the lessons learned from research data and integrating best practices from leading millennial brands into your innovation strategy, you will have a sound blueprint to transform and adapt for 2020, whether you are a traditional legacy retailer or fast-rising upstart.
Please be tuned for Part II, where we will explore in more detail the implications of millennial shoppers in each major retail sub-industry.