As baby boomers reach retirement, millennials are now reaching their prime working and spending years. Over the next five years, the purchasing power of millennials is projected to increase 133% from $600 billion to $1.4 trillion. With the millennial generation being the largest of the generations in U.S. history, their impact on the economy will be significant.
Millennials grew up during a time of major technological advances, globalization and economic disruption. Because of this, they have a very different set of behaviors and experiences.
Millennials came of age in the midst of a lagging economy, and many carry large debt loads, largely from college tuition. Consequently, this is why millennials tend to focus on fulfillment and meaning in their lives. The also prefer to sacrifice money for convenience, too.
The effects the 2008 subprime crisis had on the economy delayed millennials’ ability to “grow up”—many have delayed buying houses, having children and making large purchases, such as a car. For the first wave of millennials (those born before 1990) who could find jobs, those jobs were less than well-paid. Due to the lack of financial autonomy, for the first time since 1960, 31.6 percent of people aged 18 to 34 are still living with their parents.
Millennials, also known as Gen Y, are moving to cities straight after college. For the first time since the 1920s, U.S. cities are growing faster than everywhere else on the country combined. This migration is driving the success of the economy.
The trend is impacting transportation, housing, and home ownership. Millennials are using public transit 40 percent more and cars 23 percent less. They are twice as likely to participate in the “sharing economy”, like ride-sharing and apartment rentals.
When it comes to consumerism, millennials are skeptical of advertising, and don’t rely on traditional marketing. Trust is vital to earning their business. Many conduct research through the internet and social media to learn about a product.
By 2020, 30 percent all retail sales will be to millennials, said CEO of “The Robin Report” and co-author of “The New Rules of Retail”, Robin Lewis.
With changing spending behaviors and habit, retailers have been forced to approach the millennial market differently to baby boomers. Convenience and flexibility are important to millennials. In response, many retailers are implementing news ways of payment and providing unique experiences to cater for Gen Y. Examples of this are self-checkout kiosks and paying with their mobile device instead of having to take out their wallets.
Another aspect that millennials want from retailers is a personalized experience. To cater for millennials shoppers, retailers have had to get creative. Some well-known examples include Coca-Cola replacing their logo with the most common names, and Nordstrom opening a store with no merchandise. Instead, stylists pull stock from other mall-anchored stores and its website.
If one thing is clear from analyzing millennials’ spending habits, it’s that their love for technology, convenience and experiences will help grow the economy. These factors will be drive competition within many sectors and industries, and if companies don’t keep up, they risk going out of business. This is the new reality for producers of goods and services.
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