The Millennials’ rallying cry should be: They just don’t get me.
According to a new research study, “What Happens When Millennials Get the Wallet,” conducted by WWD in partnership with Berglass + Associates, retailers may not fully understand the needs of Millennials (14- to 33-year-olds) who number 80 million and whose annual spending power in the U.S. is $200 billion. This demographic is expected to out-spend Baby Boomers by 2017, and by 2030 will be larger in volume than all other generations combined.
In an online survey conducted in September among 121 U.S. business leaders involved in the retail industry (including department stores, multibrand specialty stores, single-brand luxury stores, mass volume, pure plays, direct-mail catalogues and home shopping), several key findings about this demographic were revealed.
• About half of the respondents are unaware that Millennials are expected to outspend Baby Boomers annually within five years.
• More than a quarter of those surveyed mistakenly believe that the number-one influencer of Millennials’ purchase decisions is online brand advertising, as opposed to the opinion of friends, which is the most significant driver.
• Less than one-third of respondents with physical stores are employing in-store apps, QR codes, mobile checkout or promotions tied to GPS-enabled devices.
• Of those who target a broad base of consumers, only 48 percent have distinct marketing strategies for reaching each generation.
• Sixty percent of respondents are not conducting any kind of research on — or analysis of — Millennials.
• Only 36 percent of respondents from companies with both physical stores and e-commerce sites are offering a seamless customer experience.
• Based on survey results from presidents and chief executive officers, seven new digitally oriented senior-management positions are quickly emerging in the retail sector, several of which will report directly to the ceo within three years. These jobs are chief cloud officer, chief content officer, chief customer officer, chief digital officer, chief e-commerce officer, chief experience officer and chief social media officer.
“This generation will have a ‘tsunami effect’ on retail,” said Leslie Berglass, ceo of Berglass + Associates. “Why? Because of their size, their yet-to-be-tapped buying power and the fact that they make buying choices in a whole new way. The study confirmed that, while retailers are aware of this young consumer, they underestimate its buying power and don’t fully understand their needs as consumers.
“Their sheer size gives them power,” he added. “They’re 25 percent of the U.S. population and are 80 million people. They’re the largest generation that our country has ever seen.”
The study revealed that 93 percent of respondents believe that Millennials are important to their businesses today, and 98 percent believe they will be important to their business in three years. “But when you drill down, they’re not doing the research to understand the customer and not making this consumer a partner at the level they demand,” said Berglass.
He added that what surprised him from the study were the talent issues. “It’s the first time in more than 50 years that there’s going to be a new member of the C-Suite,” he said. While he doesn’t look to any specific industry to recruit digitally savvy people, he said he seeks out the skills, rather than the résumé. He will seek employees from pure-play companies, digital leaders within classic retailers and, more often than not, people outside the industry, from media companies, for example. He also noted that of the executives who were surveyed, more than 30 percent are ceo’s or presidents, and as a group, they plan to significantly increase their digital leadership over the next three years. Another interesting development that emerged from the study is that Millennials value experiences over material goods, and that extends from shopping to their careers. “The work environment is as important as their pay and their titles,” he said.
There’s no question the Millennials are digital natives, and they don’t know a world without technology, the Internet and social media. They are also filled with contradictions. They are financially cautious (saddled with debt from high student loans) but want instant gratification, and they are involved in social causes and charity, yet are narcissistic. While Millennials say they value privacy, they are willing to share some private information in exchange for added benefits and discounts. More than half the respondents overestimated Millennials’ brand loyalty.
As far as the store experience, the study found that 74 percent of respondents with physical stores believe they are creating exceptional in-store experiences that are unique, memorable and fun, but only 37 percent with physical stores are using branded entertainment to impact the in-store experience. Some 26 percent said they have no plans to do that in the next two years. About half of the respondents with physical stores and e-commerce offer the ability to order online from inside the store, and another 26 percent expect to begin doing that within a year. About a third of respondents with physical stores and e-commerce offer the ability to purchase online and pick up in store.
With one or two exceptions, “hybrid” companies appear to be on the same level as pure-play companies as it relates to serving the needs of Millennials, such as offering an optimized site for e-commerce, mobile app for e-commerce and tablet app for e-commerce, among other tactics.
Some 94 percent of respondents said their companies were active in social media. Of those respondents, 68 percent said they’re offering deals and discounts via social media, and another 12 percent expect to do so within the next year. Forty-six percent of those involved in marketing report that texting is very important in reaching Millennials. Eighty-three percent of respondents whose companies are active on social media said that a senior executive was responsible for social-media content. Thirty-five percent said that the chief marketing officer was in charge of social-media content.