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?
Let’s get past the stereotypes and misconceptions and focus on the facts. Millennials number ~86 million Americans and will represent 30% of total U.S. retail sales by 2020. Is your business ready?
To first prepare for the Millennial Shopper, a retailer must truly understand who they are and not rely on stereotypes and misconceptions to prepare their business for one of the largest market opportunities in modern times.
There is significant research already being conducted by some of the largest firms and institutions about Millennials and how they compare to other generations, yet very few firm conclusions about the data exist today to more strategically understand this demographic.
To truly understand the “Millennial”, lets not overthink. Based on high-level data, there are three fundamental differences of Millennials compared to other generations which your business must keep in mind to position itself successfully to attract this market segment:
1. Millennials are the most educated in history.
6 in 10 have a 4 year bachelor’s degree, 1 in 10 have a master’s or PhD, and 1 in 4 is currently enrolled as a full-time student at a university or college. Thus, it is critical that Millennials feel informed and empowered when making shopping decisions. It’s no coincidence that thorough rating and review systems are prominent features on Amazon.com and the most successful e-commerce sites.
2. Millennials are the most ethnically diverse.
Millennials are significantly more diverse than previous generations, as seen in the graph below. As Millennials also marry outside of their own ethnicities and have more mixed-race children, this increasingly complex melting pot has a significant implication in fashion, food, and consumer goods preferences. Its 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 is vastly different.
Educated Millennials currently hold $1.2 trillion in student debt, due largely in part to tuition costs which have risen 500 percent since 1985. Understanding that disposable income and the ability to make large home, furniture, and car purchases are dampened by student loan debt, flexible payment methods, such as monthly subscriptions and “renting” luxury items, and credit-friendly, no-interest plans are increasingly appealing to Millennial shoppers.
Adapt or Die.
Based on these facts about Millennials, how can retailers use this knowledge to adapt their businesses and be successful with the largest shopping segment by 2020?
There are three main components that should be fundamental to any retailer’s strategy in attracting and retaining Millennial shoppers:
1. Wow customers digitally.
Under Armour has been very successful in harnessing a connected fitness community and is now beginning to integrate technology with apparel. 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.
2. Spend radically more on the In-Store Experience.
Going to a physical retail store is no longer a necessity for Millennials. It is a choice. Apple mastered the in-store experience with its revolutionary store design, Genius Bar associates, and the embodiment of fanatical loyalty whenever a new product is released. Successful retail is about the new definition of the in-store experience and driving omni-channel touchpoints throughout the journey. 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 to make their shopping and customer experience more convenient and complimentary. Uber is a model example of how it enables choice for its customer 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. Even integrating Millennial shoppers to develop and test your products could be very effective.
By taking the lessons learned from the data and integrating the above 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.
To learn more about Boardroom of the Future, join us September 12-14th in Miami, Florida for the SAP Retail Forum.