Features, Millennials, Trends

Asking Why Gen Y Shops the Way It Does?

Many retailers have spent hours worrying about millennials. And with good reason. The generation, also known as Gen Y, has exhibited some distinctly different shopping patterns from earlier cohorts of the same age. Looking at the data, there is a reason to be less nervous about the spending patterns of these next-generation shoppers.

New data shows that younger millennials (those aged 18-24) increased their spending by 29 percent in the 12-month period ending in June 2016, compared with people in that group in the year ending June 2015. Interestingly, that spending jump is particularly pronounced in health and beauty, home improvement and grocery. This isn’t a one off. People who were in the 18 to 24 age group in the year ending June 2015 spent 25 percent more than did 18- to 24-year olds in 2014.

So What’s Going On?

It turns out that millennials are every bit as easy to understand as Gen X or the boomers, as long as you look in the right places and ask the right questions. Look at their shopping receipts. And ask, as simple as it may sound, “why would they buy from me?”

Earlier this year we shared data from our Checkout Tracking℠ service with researchers from the Jay H. Baker Retailing Center at the Wharton School of The University of Pennsylvania. Checkout Tracking data is culled from millions of receipts that consumers send to us. Those receipts yield detailed, itemized data about individual consumers from many stores, across all retail segments, covering both online and brick and mortar.

We found that while life events often drive purchases (i.e., when someone has a baby), two surprising factors determine why a millennial chooses one retail location over another:

  1. Level of convenience
  2. Generational appropriateness of the experience

How Easy Was That?

So let’s look at the first motivation: convenience.

Millennials tend to buy in specialty stores, not department stores. The online specialty stores, that attract them the most are those that targeted this age group with online/mobile strategies. Two successful brands are Asos and Victoria’s Secret. What’s their strategy? Speed and convenience.

Millennials are famously attached to their mobile devices. So a specialty store with a well-developed mobile strategy offers them both speed and ease. Find what you want online. Dash into the store and try it on, if need be. Buy it there. Or buy it from your phone.

Department stores, with floor plans that welcome browsing, aren’t in the speed business. They may offer tremendously varied inventory. They may win on price or location, or both. But no one thinks of department store shopping as rapid.

Need Another Example?

Everyone visits a convenience store from time to time. Boomers, for example, stop at c-stores for gasoline. Millennials buy food there—a lot of it. Plus gift cards. Compared with other shoppers, millennials spend a relatively higher share of their convenience-store budget on gift cards as well as grocery items and housewares. This outsized purchasing of gift cards is especially pronounced among older millennials, who also spend a significantly larger share of their mass merchant expenses on gift cards than we’ve seen with other generations. Why? Speed and convenience. As pragmatic as it is, can you think of a meal that is faster than something from a c-store? Can you think of a gift that is faster and easier to find than a gift card?

Will I Remember This?

Now let’s consider the second factor: a generationally appropriate experience.

Millennials are noted for their embrace of experiential retail. It’s easy to misunderstand what that actually means. Gen Y does, in fact, gravitate toward purchases that are memorable. A good meal with friends is generally held in higher regard by millennials than a new pair of pants, no matter how wonderful the pants might be.

In truth, all consumers in all generations have an interest in experiential retail. The differences are in what each demographic finds memorable and exciting. For example, boomers over-index for QVC. There’s something about that shopping experience that resonates with them. QVC managed to marry shopping to the “revolutionary” leisure-based activity for boomers when they were younger: watching cable television.

Millennials, on the other hand, under-index for QVC. Television is still part of their life, but young adults have cut the cord. A live sale on live TV simply doesn’t fit their lifestyle. On the other hand, millennials over-index for apps that offer ease, convenience and fun shopping experiences (e.g., Uber, Seamless, GrubHub, Target and Etsy).

Have They Changed? Or Did Retail Change?

What is driving a rise in younger millennials’ willingness to spend on retail two years in a row? One likely explanation, and perhaps the likeliest explanation, is that retailers have begun to understand what millennials want, and provide it. Whether it’s specialty stores with an assortment aimed at an eco-, price- and fashion-conscious consumer; a department store that has decided to bring specialty stores inside the building; apps that make shopping easier; policies that make returns free; or customer-service departments that are unified across both brick and mortar and online, the retail industry is, at last, starting to get it right with young adults.

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