How Millennial Spending Habits Could Spark the Next Economic Crisis — And the Role of Retail Tech in Preventing it
Here's what we know about millennials: they're the largest generation to ever exist in the United States. They came of age on the precipice of the digital era. They have very little money in savings (most of them less than $1,000) and often live in the homes they grew up in. They do not marry as young as their parents did, and they prefer access to goods and services over ownership of them. Furthermore, millennials have more access to, more information from, and more reliance on technology than any other generation before them.
Do Not Spend it All in One Place
So if millennials are working but not leaving the nest, paying less for access vs. ownership of cars, vacation rentals, and even designer threads, and have the technology to find the best price for any given product, where does all the money go?
According to a report from Charles Schwab, millennials are throwing their dough at pricey coffee drinks, clothes they don't need, car services and trendy restaurants. Nice life, right?
These seemingly millennial spending habits are likely a side effect of the oft-portrayed “I want it now” attitude — and frankly, a history of getting exactly what they want when they want it (see: personalized supply chain). If everyone gets a trophy, so too can everyone ride in a luxury sedan to the latest Asian fusion hot spot at the drop of a hat (or the press of a button). Can you really blame them?
Warning: Shopping Kills (Your Bank Account)
Where does all that instant gratification and button pressing end for millennials? If everything shoppers want (note, I did not say need) is just a click, tap or swipe away, how long until the money runs out? And better yet, as retailers encourage and enable impulse buying, are they somehow accountable for ensuring millennials and the generations that follow them do not find themselves in financial ruin?
Think about it. If millennials aren't buying houses (whether because they don't want to or cannot afford to), the real estate market will eventually dry up. If they depend on ride sharing instead of car ownership for transportation, the auto industry could be devastated. And if they don't have the capital to invest in the education and furtherment of future generations, well … things could get pretty dire. All of that digital instant gratification and preference for experience over product could eventually spell trouble for the economy at large.
In Defense of E-Commerce
I'm not saying that e-commerce is a bad thing. It's a clear driver of the retail renaissance, brings unprecedented convenience to the marketplace, and opens doors for businesses of every shape and size. However, its overuse should be closely watched, lest our Golden Age of Retail result in an unforeseen economic crisis decades down the road.
Not to mention, impulse purchases aren't all good news for retailers. In stores, those last-minute checkout counter candy bars, bottled waters and magazines certainly raise profits. But in the world of e-commerce, impulse buying means greater shipping costs and a connected global network of suppliers, distributors and last-mile fulfillment strategies.
How Retailers Can Ethically Balance the Force of E-Commerce
With so much liability to fulfill our every need already, does it fall on the shoulders of online retailers to uphold ethical standards for impulse purchasing, too?
If retailers want to operate, profit and retain customers ethically (and potentially preserve economic stability), the answers lie in technologies like artificial intelligence and predictive analytics. By providing smart, personalized assortments and fulfillment based on unique customer data, millennials (and all shoppers) should feel less compelled to make impulse purchases because everything they want and need will already be presented to them in a user-friendly, personal way.
It's no secret that e-commerce is one of the most powerful tools in every retailer’s belt, and when it's coupled with cutting-edge technology that's designed for the Golden Age of Retail, shoppers can quickly and easily get what they need, without indulging in too many impulse purchases. That means a better customer experience, better brand sentiment for retailers and, of course, less guilt on both sides of the transaction. We will save that for the candy bars in the checkout line.
Jenny Reese is associate creative director at Infor Retail, a company revolutionizing the customer experience across every channel with smart, modern software in the cloud.
Related story: How Poshmark Creates Loyalty Through Influencers