Millennials are taking Depression-era frugality to a whole new level. Finding themselves with more time than money and armed with total pricing transparency and unlimited selection, Millennials are pushing retailers to learn new tricks.
Here are four ways Millennials are shaking up retail.
1. If You’re Not a Millennial, Chances Are You Overpaid
According to a new study released from Deloitte, nine in 10 shoppers know what they’re buying before they arrive at a store. Bloomberg calls this trend the ‘Rise of the Surgical Shopper’. Techcrunch heralds the “Death of the Impulse Shopper”. Whichever way you look at it, web-savvy Millennials ALWAYS do their homework before selecting a store. They know what they want and are more likely to treat every trip as a ‘mission’ trip.
The impact: Shoppers are visiting fewer stores, but spending more per store. “Typically traffic and sales growth rise or fall in tandem. Last year [they] spotted something new. Even as retail sales grew 3.5 percent, according to the NRF [National Retail Federation], traffic declined 0.5 percent.” This makes every customer more important, and requires a greater emphasis on ‘converting’ every shopper to a buyer. As a result, retailers can no longer rely on impulse buying to pay back the cost of loss leader promotions, and rewards for store loyalty. Instead, they are having to learn a whole new set of tricks to attract value conscious, socially motivated shoppers.
2. Gaming the System
Location-based services like Foursquare and Facebook Places have turned shopping into a game and taken loyalty programs to a whole new level. “Millennials are even more willing to participate in loyalty and reward programs than their parents, but they expect reward programs to be free, easy and fast.” According to a new survey, 77% of U.S. Millennials participate in loyalty programs, and 78% say they are more likely to choose a brand that offers a loyalty or reward program over a brand that doesn’t offer one. Like older consumers, they prefer universal rewards that can be redeemed with a common currency.
The impact: Retailers can no longer rely on store-specific rewards programs. They need to tie into the larger eco-system, in creative ways. It will also be essential to respect shoppers’ privacy while providing them with offers that make shopping more fun and engaging. Finally, redemption must be seamless. A recent collaboration between retailers, H&M and Sports Authority, and American Express enables shoppers to get cash back discounts on their AMEX cards when they check into a venue using Foursquare and spend money using their American Express cards. H&M will give you $10 back on a $75 purchase, while Sports Authority will reimburse you $20 for spending $50.
3. Why Stress? Shop Online.
Multi-channel shopping is a reality for most Millennials who are just as comfortable ordering online as in the store. Last week, Millennial student, Tara Hunt, wrote a survival guide for Millennials for Black Friday which advised her peers to skip the event altogether and shop online. Here’s her description of the check out line:
If you survive the parking lot, the tsunami of people and the flames and demons from the toy aisle, you will find yourself standing for eternity at the check-out counter. There, you will find an exhausted and irritable employee wearing something nauseatingly festive like a reindeer antler headband or elves’ ears. They will greet you with a forced grimace and bid you adieu with a nonsectarian, monotone “Happy Holidays,” and in between make certain that you know that working there is the best form of punishment man could devise. Smile and leave quickly.
Millennial fashionistas know the best goods and prices can be found through online shopping clubs like Gilt.com, Shopitome.com and Designer Social or OneKingsLane.com. An apparel retailer we work with reports that half of their sales are online. Today is Cyber Monday and I suspect that much of the activity will have been Millennial-fueled.
Impact: Retailers will need to find ways to make shopping online as easy and fun as shopping in stores. Amazon, Zappos and Target are leading the way, keeping it simple with no shipping costs, easy returns and peer reviewed merchandise. I especially like how Target displays navigation for clearance, coupons and the weekly ad prominently on the home page, acknowledging the importance of bargains. Similarly, OneKingsLane.com offers ONLY sales and they last just a few hours or days. Neither site feels like ‘discount’ merchandise, rather they extend the ‘thrill of the hunt’ to a different venue.
4. Does This Dress Make Me Look Fat?
A University of New Hampshire researcher, Nelson Barber, investigated the shopping and purchase habits of different generations and concluded that one of the most distinguishing characteristics of Gen Y shoppers was their reliance on peers. Unlike older cohorts Gen X and Boomers, Gen Y wants assurance that their decisions will help them fit in and ‘conform with the crowd’. Research conducted this year by Kansas City-based agency, Barkley, confirmed that Millennials shop for fun and relaxation, and they are twice as likely to shop with friends.
It’s interesting to note that female Millennials are twice as likely to shop with friends or significant others and they’re significantly more likely than older generations to see shopping as a pathway to relaxation. They’re also much more likely to consider access to shopping areas to be important in deciding on vacation destinations. Male Millennials appear to be much more comfortable with shopping than their predecessors; 30 percent say they shop for apparel two or three times per month, and 8 percent shop once or more per week.
Impact: If shopping is a social event, smart retailers should find ways to make it as fun and social as possible. Barber recommends greater use of peer-sharing tools, online and via mobile:
Barber recommends companies focus on attracting Generation Yers through peer interactions. Websites should be optimized with social networking, blogs, and live chat customer service. The mobile Web also plays an important role in how Generation Y socializes. “Because Generation Y is media savvy and conscious of being the target of marketing, brands that succeed will be those that open a dialogue, admit their mistakes, and essentially become more transparent.”