At 83 million strong, the Millennial generation is having a bigger impact on retail more than any other generation, including Baby Boomers. Pew Research reports Millennials are the largest generation in the U.S. labor force with more than one in three workers, or 56 million consumers between the ages of 21 and 36.
As this group’s earnings rise, the impact is being seen in additional housing demand. Industry consultants at NPD Group said there are several differences between Millennials and other generations and it behooves retailers and brands to understand these trends when marketing to a savvy consumer group.
NPD’s Chief Retail Industry Advisor Marshal Cohen convened a panel of Millennials at NPD with industry veterans to review trends and help retailers and brands better understand the minds and households of consumers born between 1985 and 1996. NPD released a report outlining eight trends that try to separate myth from reality about the purchasing mindsets of Millennials.
Millennials are retail explorers seeking out new items, brands and uses for existing products.
Millennials constantly interview brands, meaning that a brand has to prove itself every day, according to Matt Powell, senior toy advisor at NPD. He said through the years Boomers have had fewer shopping choices on everything from how and where they shopped to what they purchased.
“Today as Millennials are savvy consumers the choices are infinite and as close as their smartphone,” he noted in the report.
Steven Baker, technology advisor at NPD, said the Millennial generation is more tech forward than other consumer groups. He said Millennials are more willing to try new products and if they like it they tell everyone. Conversely, if they don’t like it, brands can sometimes redeem themselves by engaging with Millennials and adapting products based on consumer feedback.
He said Apple’s thinner, better and lighter screens are a direct result of addressing feedback from what Millennials and first adopters of technology wanted.
Juli Lennett, industry advisor for toys at NPD, said Millennials are influenced by social-media and that’s the medium in which many will find new products. She said Millennials are known to watch online unboxed videos of kids playing and reacting to toys in order to evaluate the items. Lennett said this is a real shift and marketing dollars are moving from traditional TV advertising of toys to YouTube videos that seem more authentic.
While Boomers and Generation X were focused on moving up the ladder with bigger houses and fancier cars, the Millennial generation is more apt to trade things for experiences, favoring memory building over status-raising purchases.
Michial Miller, account manager over books at NPD, said although almost left for dead a few years ago, book stores are now thriving and are seen by Millennials as community gathering places and places to host events.
“They are more like a hub of culture, than just a retail store. I think there’s something to be said for relationship building and being more connected,” he added.
Ryan Finn, director of consumer and commercial technology at NPD, said Millennials tend to spend more on experience and travel and then document and share those experiences online through social media networks. He said GoPros were a direct result of Millennials seeking better ways to document their adventures than simply recording with a smartphone.
Elizabeth Lafontaine, industry analyst in apparel for NPD, said Millennials are leading the charge among other consumers who are spending less on apparel and more on travel and experiential outings.
“Apparel is experiencing declines exacerbated by Millennials shifting their wallet spend toward experiences,” she noted.
FUNCTION OVER PRICE
Boomers and Generation X are known for bargain shopping, couponing and price comparisons, but Millennials see function ahead of price. David Portalatin, food analyst at NPD, said Millennials are leading the fresh food and beverage craze.
“The surprise here is that Millennials are in the stage of life when people typically consume lower quantities of fresh items in favor of more time-saving and convenient options,” he added.
Rosa Chan, account manager for foodservice at NPD, said Millennials love to feel good about what they eat and are willing to pay more for healthy food.
When it comes to non-edibles, Miller said Millennials seem to be more interested in convenience and less conscious of prices compared to other generations. The rise of Amazon Prime memberships among Millennials is an indication they want access to items delivered to them in two-days and are willing to pay for that privilege. Roughly 72% of Millennials are Prime members, compared with 54% of Generation X and 34% of Boomers.
Matt Powell, sports advisor at NPD, said Millennials grew up with the Internet and they are the most connected generation. He said they love sharing and it’s second nature to this generation.
Lafontaine said the idea of sharing fashion was brought to life with the Rent The Runway business that allows consumers to go online and rent a high-end evening gown which they wear once and return. She said Millennials’ willingness to share and rent instead of owning is a growing trend in retail beyond just fashion, but also transportation with Uber and Lyft and lodging with Airbnb.
Millennials are doing more at home than previous generations, whether it’s working or entertaining, the generation wants to be comfortable in their nest. Finn said home automation was one of the fastest growing technology categories during the 2017 holiday season. He said smart-home demand is being driven by Millennials.
“Our Connected Intelligence team tells us smart home product ownership by people
between the ages of 18 and 34 more than doubled to 27% in 2017, which is also double the penetration in the total market,” Finn noted.
DOING VS. OWNING
Cohen said Millennial consumers are more selective about their purchases. They take the time to consider how they will spend their money often mulling over purchases for several days before they buy.
“It’s not about purchasing things just because they can. It’s not just the acquisition of stuff, it’s the value received from the purchase,” he said.
Powell said Millennials, who are still paying down college loans, are likely more cautious about their purchases. He said they research before they buy looking not only at price but more so at quality and value.
“The purchase must solve a need, in addition to looking good,” said Stephen Baker, industry advisor for technology and mobile at NPD.
Millennials share everything because it helps to build their own brand, Lennett said.
Amanda Gonzales, analyst for makeup industry at NPD, said social platforms like Instagram and Snapchat allow consumers to showcase their own makeup skill or how to make their own DIY facial scrub which helps Millennials in their mission to create a sense of self. Millennials want to be able to portray “who we are on our own terms, rather than relying on brands to tell us who we should be or what we should aim to be,” Gonzales noted.
Cohen said Millennial consumers aren’t necessarily evaluating the value of their purchase in relation to size or conventional norms set by other generations. This generation often makes decisions on end benefits and usefulness. They won’t subscribe to cable in part cause it’s too much of what they don’t want or need.
John Buffone, analyst of connected intelligence at NPD, said Millennials are engaged video consumers and much of their usage is focused on mobile devices. He said consumers aged 18 to 34 over-index the norm for video calling, taking, posting and uploading videos, and watching streaming video on their smartphones.
“They are leading the transition toward DirecTV Now, Hulu with Live TV, and other streaming pay TV services.These services have built user interfaces for a viewing experience that spans TVs and mobile devices,” he said. “Millennial content consumption trends point to an engagement pattern that blends TV with mobile — one that remains dedicated to TV screens in the primary viewing location and mobile viewing on smaller screens in secondary rooms and on-the-go.”