Just when retailers had figured out how to appeal to the huge target market of Baby Boomers, along came their children, the Millennials. They constitute approximately one-quarter of the population, and their annual spending appears likely to surpass $1.4 trillion—or about one-third of all retail sales—within the next few years. Enticing this distinct generation of shoppers into stores, whether virtually or in person, and encouraging them to spend their limited funds requires a whole new set of approaches—a lesson retailers need to learn quickly if they hope to last until the next generation rolls around.
The characteristics of Millennials set them clearly apart from any other generational cohort. They have relatively little to spend, because they are just starting out in their jobs, and those jobs are hard to get in the post-recession era. Many are underemployed, if employed at all, and some estimates suggest that they face an astonishing average of $27,000 in student loan debts. Moreover, they are the first generation of true digital natives, such that whatever form technology takes, they can adapt readily and seamlessly to it. For them, digital media are inherent and innate, rather than requiring the kind of behavior shifts that they have demanded of older consumers. Finally, Millennials exhibit a notable lack of loyalty and a strong sense of skepticism, such that they switch religions, political parties, and, of course, retailers without much concern.
Such traits clearly constitute challenges for retailers. If the current target market has little disposable income, it becomes far more difficult to entice them to spend money on the latest fashion or the newest version of a gadget. Their comfort with digital media also might imply that retailers’ sunk costs in storefronts and physical outlets are becoming obsolete, leaving them with expensive, inefficient assets that do little to increase their business. And if an entire cohort of consumers is inherently predisposed to switching behaviors, it makes it very hard for retailers to build the valuable kind of customer loyalty they need.
The news isn’t all bad for marketers though. Because of their financial constraints, Millennials love a good deal, so retailers that can offer great value should enjoy a rush of business from them. For fast fashion stores, Millennials’ love of an affordable price has been the primary source of their remarkable growth. In addition, their comfort with various forms of digital media means that marketers can reach them through a wealth of channels, as long as the marketers learn how to use them effectively. Furthermore, this comfort level encourages young consumers to interact with marketers and retailers through digital channels, producing an unprecedented expanse of consumer feedback. Still, because Millennials, with their readiness to change, also like instant gratification, it appears that brick-and-mortar stores should not be relegated to the dustbin just yet. No mobile or online order, regardless of how responsive, can match the immediacy of walking into a store with money and walking out with the desired product in hand.
- Why are Millennials such a good market for retailers to target?
- Why are Millennials a challenge for retailers to catch?
- How can retailers meet that challenge and make Millennial customers loyal?
Source: Kelsey Lindsey, Retail Dive, April 8, 2014