How Millennials Are Changing the Retail Industry
By 2020, millennial spending in the U.S. is projected to reach $1.4 trillion annually, accounting for 30 percent of total retail sales. While the impact of the millennial generation has long been talked about, most retailers have yet to adapt to meet the needs of this increasingly influential audience.
Millennials are defined by more than just their age. To truly understand millennials, retailers must take into account what differentiates them from other generations, their shopping habits, and their growing influence in an evolving retail environment.
Millennials vs. Gen Xers
While Gen Xers and baby boomers’ major spending years are behind them, millennial spending is just beginning. Baby boomers have entered retirement while millennials, who have held out on significant purchases and major life decisions, are just now getting married, buying homes, and having children.
While age, marital status and other demographics influence shopping habits, millennials approach retail differently based on their own unique experiences. Growing up in a time of technological disruption, a fickle economy has affected the way they shop and make purchases. Though they’re often chided by older generations for being egocentric, millennials are more socially conscious shoppers. In fact, those with the highest likelihood of shopping for secondhand clothes are women 18 to 24 and women 65 and up, with the former group almost 2.5 times more likely to do it because of environmental consciousness.
Millennials also value experiences over products, often choosing to attend a live event over buying a physical item. These experiences are shared with friends live and then documented on social media to share with the rest of the world.
Online vs. Physical Stores
Perhaps the biggest difference between millennials and Gen Xers and previous generations is their dependence on the Internet. Online shopping has made buying everything from food and clothes to vacations and computers as easy as one click. Despite the convenience online shopping offers, however, millennials are surprisingly channel agnostic, easily switching between buying online and in stores.
According to research by behavioral marketing firm SmarterHQ, half of all millennials actually prefer going to physical stores as a primary means of shopping. For young consumers, shopping in-store isn’t a necessity — it’s an experience that should be enjoyable and as easy as shopping online. To meet millennials’ high shopping demands, online and in-store, retailers should ensure there are plenty of touchpoints to keep their attention. A busy checkout line or a lack of customer service, both physical and digital, can deter them from buying.
Another reason millennials choose to shop in-store is the social aspect. A quarter of millennials like to shop with family and friends, according to a report from Euclid. This is undoubtedly connected to millennials’ desire to share experiences with others, even if that means snapping a selfie with friends at a store and displaying it for the world to see on social media.
The Millennial Influence
Even more than the technology that has so deeply influenced their lives, millennials are influential themselves. Since most of them were born before the internet became mainstream, they remember a time when they didn’t have a laptop computer or smartphone, like the generations before them. But they've also reaped the benefits of technology, and now rely on it heavily in their daily lives, like the latest generation of young people, Gen Zers. This gives millennials a unique perspective, one capable of influencing the way the rest of the world, even older generations, thinks, behaves and even shops.
According to Accenture, millennials are not only changing their own shopping behaviors, they're also transforming those of their parents, who imitate their children’s behaviors and demands for a seamless experience as they become better equipped with technology. This is both good and bad news for retailers. Those brands that are willing to grow with an increasingly tech-savvy audience will prosper; those unwilling to change will fail. Many long-established retailers, including millennial favorite Toys"R"Us, have closed their doors because they were unable to grow their existing business model.
Millennials are beginning new chapters in their lives and will inevitably spend more money as a result. Now, more than ever, retailers should capitalize on this audience. While marketing and catering to the millennial market presents its difficulties, both digital and brick-and-mortar retailers must meet the needs of this audience — or fall by the wayside.
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Bart Mroz is CEO at SUMO Heavy, a digital commerce strategy firm. The company builds, connects, expands and invests in growing online retailers. This group of experienced strategists, consultants, designers and developers works to build solid brands and to create effective online retail solutions. Bart is an expert in e-commerce, business consulting, and technology strategy.