I found a post today on a financial analysis blog, SeekingAlpha.com, It is so provocative and insightful, I am going to share it in (nearly) its entirety.
The basic question is whether Millennials will find Wal-Mart’s value proposition appealing — and if they don’t, what are the implications for Wal-Mart’s future? I don’t know whether or not Millennials will or will not embrace Wal-Mart, but as Ken Gronbach, the author of this post points out, it’s not a slam dunk. In fact, after I posted the link on Twitter, one of my Gen Y followers replied to the question, “I hope not!”
“(Wal-Mart’s) retail concept is not about selection or breadth of assortment and it is certainly not about short runs of anything. This concept, therefore, would struggle with the fashion tastes of a new market and therein lies the problem. Generation Y, born 1985-2004 and currently between the ages of 5-24 and the biggest generation in U.S. history is the new market. And new markets generally have very fickle tastes. If they don’t want something, it doesn’t matter if it is free–they just don’t want it. Wal-Mart is very used to dictating what their customers should buy–large quantities of very cheap retailer’s choice items.”
“Wal-Mart is a Baby Boomer-based company. Boomers were born 1945 to 1964, and Wal-Mart has decades of experience catering to the clearly defined tastes of this generation who are currently 45- to 64-years-old. Wal-Mart has figured out what the mature Boomer market buys. They have also refined this demand to the narrowest selection possible, almost telling Boomers what they will buy. Boomers in turn are okay with this because when you are between 45- and 64-years-old you have pretty defined tastes and preferences that influence your buying of stuff. If Wal-Mart does not have what a Boomer really wants, but does have something close at a very low price, the Boomer will buy it.”
“So where is the rub? It’s simple. When consumers hit about 50 years old, according to the U.S. Bureau of Labor Statistics, their demand for stuff begins to subside. At 60 years old a person pretty much has all the stuff he or she needs and then some. At 60, one’s body has stopped changing so one can wear clothes longer, a lot longer. If you want to see what was fashionable thirty years ago go to a Miami retirement community. The point here is that the bloom is off the rose of the Boomers’ consumption of things. The Boomer population is a huge bell shaped curve with many Boomers turning sixty at its leading edge and with its very top cresting at 50-years-old in 2007. All of this means that Wal-Mart needs to find a new market fast if it wants to continue doing business.”
“But where does Wal-Mart turn? The two U.S. generations over 60 do not have the critical mass to serve their infrastructure, and besides, for the most part they have stopped consuming. The U.S. population now 25- to 44-years-old is a non-homogeneous combination of the small native born Gen. X (nine million fewer than the Boomers) and the free standing market of Latino immigrants.”
“So who’s left? It is Gen. Y, the largest and most powerful generation of consumers this nation has ever seen. Will they be the solution to Wal-Mart’s sales problems?”
“No. Gen. Y is an emerging market, a huge bell-shaped curve with its peak at age 19. They are inhaling entertainment products, fashion, food, electronics and transportation. Selection is everything to them. They do not care about low price unless it is exactly the item they want. Their tastes change daily. They don’t know what they will want six months from now. Wal-Mart’s limited selection, low price offering to the Boomer will not and cannot translate to Gen. Y.”
“Oh yes, and one more thing. Gen. Y is on track to become the greenest and most humanitarian generation in U.S. history. If one wants to do business with them they had better be very green and very nice to their fellow mankind. And popular perception is that Wal-Mart has a dismal record on both accounts. Perception is reality. This fact could seriously injure Wal-Mart’s business all by itself.”
