They may be young with many major life experiences still to come but, when it comes to spending habits and material addictions, retailers can't afford to ignore the power of the Millennial (aged 18 to 34) according to a study by JLL Research.
With cash to spend, and the need to own the latest-and-greatest goods and gadgets, the youngest group of adult consumers, born between 1980 and 2000, already spends US$600 billion a year in the United States alone - and show no signs of slowing. In fact, they're on track to spend US$1.4 trillion annually by 2020, accounting for roughly 30% of all retail sales.
Few generations have taken so divergent a path from the lifestyles, desires and shopping habits of their predecessors as these highly connected and cost-conscious consumers. Parents of Millennials probably didn't spend their first pay cheques on devices to connect them to social networks 24/7, tagging and uploading in their sleep. But neither did they enter the workforce in the midst of the Great Recession.
When it comes to today's consumer culture, Millennials are more explosive than boomers; and for retailers, they outpunch Generation-X as the X-Factor to shopping savviness. Targeting their interests and needs could mean vast sales volumes. But what can retailers and retail property owners do to capture Millennial spending?
JLL identified several key marketing strategies that appeal to consumers 18 to 34 years old, including:
- iMeet + e-shop = they spend. Meet Millennials online.
From chat rooms to FaceTiming, and dial-up connections to 3G networks, Millennials came into the world as technologists. They connect with the world through mobile devices and when it comes time to shop, they research products, compare prices while shopping and consult with peers or online consumer reviews to aid their evaluations. Millennials use various media simultaneously and expect instant gratification, with little patience for stale website content, outmoded technology or outdated merchandise and in-store displays. Technology influences Millennials more than any other age group. Compared with the population in general, they're 262% more likely to be influenced by mobile apps and advertising, or by blogs and social networking sites (247%).
"They certainly use their comfort with technology to their advantage and it's often to compare prices, learn about the latest trends and capture the best deal possible before they walk into a physical retail space," said Julie Rickey, JLL's director of retail property marketing. "Digital tools that engage these shoppers and enhance their in-store experience are a good investment."
- Solicit the savings, captivate through coupons.
Millennials wield great spending power, but many are unemployed or underemployed. Among 18 to 29 year olds, the effective unemployment rate was 15.5% in April, according to Generation Opportunity, which tracks Millennials. While 24% of US Millennials earn more than US$75,000 per year, another quarter earn less than US$25,000, and an equal amount live with their parents. Understandably, these shoppers are highly sensitive to price and exhibit a penchant for coupons and special promotions. While shopping in stores, they use mobile devices to compare prices.
In short, push coupons and targeted promotions. Research shows that 38% of Millennials are influenced by savings-related signs and in-store displays, compared with 28% of all shoppers. Shopper loyalty programmes, the ones that reward "frequent spenders", influence more than half of Millennials, compared with 40% of shoppers in general.
"For Millennials it's all about value," Rickey explained. "They are highly price-sensitive and will continue to place great emphasis on price and value. Those core principles are not going to change anytime soon, so it's up to the retail industry to adapt to this shift in consumer demand."
- "Like, going to the mall" doesn't end with the teen years.
Four of five Millennials prefer to buy in stores vs. online, and more than half make monthly visits to their favorite stores in most retail categories. JLL research shows they will seek out good deals in stores and online, but gravitate to gathering places and experiences that retail properties can offer.
But these consumers are less likely to visit lifestyle centres (shopping centres that combine the traditional retail functions of a shopping mall - but also have leisure amenities oriented toward upscale consumers), as they typically cater to older and more affluent shoppers. Lifestyle centre landlords can counter those tendencies by offering a broad choice of dining, apparel brands favoured by young adults, fitness centres, hair salons, bicycle shops, pet stores or dog runs, and uniquely local offerings. And while Millennials gravitate to discounted grocers, they don't frequently shop at outlet malls, which may be similarly discounted in price but are often inconveniently located.
- Hands-on, in-store, before heading out.
Millennials need to play prior to purchasing. Stock stores with mobile coupon scanners and in-store kiosks that allow shoppers to test merchandise, as well as check the web for customer reviews in real-time. Millennials are 77% more likely than the average shopper to be influenced on brand decisions by in-store experiences.
Millennials like to touch and try out products, know what their peers think, and will hesitate to purchase untried goods. Retailers need to provide mobile-enabled websites and apps that help customers find deals, research items and read reviews.
- So fresh and so green.
Millennials are defined by their affinity for change and their support for sustainability. With pop-up shops, which conjure a sense of newness and continual change while filling vacant space, retailers cater to Millennials' desire for ever-evolving spaces with fun sensory experiences, and can feature refreshed showrooms and merchandise. Dense, pedestrian-friendly developments appeal to Millennials, as do green spaces and evidence of environmental sustainability.
Stores and properties that promote sustainability will win this group's respect and business, and hosting special events, concerts and exhibits connect them with entertainment in the consumer's mind.