Nov 12, 2012
Retailers May Need to Change Offerings to Capture Millennials
Retailers may need to change their offerings to capture the hearts and wallets of the millennial generation, according to “Millennial Passions: Food, Fashion, and Friends,” a new article by The Boston Consulting Group (BCG).
Millennials, defined as those 16 to 34 years old, are forming strong brand preferences and intentionally influencing the behaviors and brand choices of family, friends, and even total strangers.
"Millennials’ impact will extend beyond generational lines," said Jeff Fromm, executive VP at Kansas City, Miss.-based Barkley and a coauthor of the report. Millennial brand preferences and buying patterns are early indicators of trends among non-millennial consumers. Their attitudes spread quickly among their peers, then reach across generational lines. For example, non-millennials report influencing spending and brand preferences of spouses and kids; by comparison, millennials perceive their influence to be over parents, siblings, grandparents, classmates, coworkers, roommates, and even complete strangers.
“Interestingly,” Barton said, “Millennials report more likelihood to broadcast negative experiences or to look for ‘knockout’ criteria on a brand or product online compared, for example, with non-Millennial women, who report willingness to post positive as well as negative reviews and stories.”
Restaurants are high on millennials’ spending list
Restaurant meals and drinks are high on the list of what millennials like to spend their money on—ranking above consumer electronics, apparel, footwear, beauty and cosmetic products, and accessories.
They eat out more often than non-millennials (3.4 versus 2.8 times per week), regardless of their income or household composition, and they prefer fast-casual, takeout, Asian, exotic, and organic foods more than non-millennials do. This consumer generation is also much more likely to eat out with friends and coworkers (reported by 65 percent of millennials compared with 43 percent of non-millennials).
Millennials visit mainstream casual restaurants but prefer fast-casual options such as Panera Bread, Chipotle Mexican Grill, and Pei Wei Asian Diner. “Regardless of price point, Millennials expect a great dining experience,” said Chris Egan, COO at SMG and coauthor of the report. “Affordable fast-casual and fast food restaurants with locally sourced goods, exotic flavors, and service levels historically reserved for higher-quality restaurants will most likely garner a disproportionate share of Millennial dining spending.”
Forty-seven percent of millennial women reported shopping more than twice per month, compared with 36 percent of non-millennial women. This difference in shopping frequency was even more striking among men (38 percent for millennial men versus 10 percent for non-millennial men). Millennial men spend twice as much on apparel per year as non-millennial men; millennial women outspend non-millennial women by a third.
Fashion magazine articles and editorials, retailer websites, apparel brand websites and social media, fashion blogs, and store associates are top sources of trusted information on trends, products, and brands for millennials.
As with dining-out preferences, millennials tend to shop in groups and consider the opinions of others more than non-millennials. Millennials prefer an experiential, lifestyle environment, like to receive help and approval from fashion consultants rather than just basic sales assistance, and value store environmental factors more than their non-millennial counterparts.
Retailers, malls, and restaurants can win over millennials
To win over millennial consumers, the article says, retailers and shopping malls will need to consider several factors. They should emphasize group-shopping experiences, create in-store events and social forums, use mobile apps and social media, integrate their in-store and online offerings so that millennials can compare prices on their smartphones or return their online purchases in stores, and in general make shopping fun, fast, and easy.
For restaurants, the keys to success will include faster service (along with ready-to-eat and to-go options), fast-casual formats, and happy-hour, late-night, and bar experiences. Technology should again play a central role—options such as online reservations and self-ordering systems will appeal to millennials - and social media will matter to restaurants as well. Further, menus themselves should include unusual, exotic, organic, or local ingredients, including “crowd sourced” options.
To stay relevant to millennials over the next three to eight years and retain their popularity with the succeeding generation that will begin to emerge in stores and online in this time frame, stores and brands that target teens and young adults must reinvent themselves.
“For brands that appeal more to non-Millennials, as well as luxury and accessible-luxury brands and multibrand, multicategory formats like department stores, the challenge is fundamentally different: how to introduce their goods and brands to Millennials at the appropriate life stage and with authentic and relevant products,” said Christine Barton, a partner at BCG and lead author of the article. “And, importantly, when to do so, given that Millennials are not their core customers today, but will be in ten years.”
The article is based on a survey of 4,000 millennials and 1,000 non-millennials (ages 35 to 74) conducted by BCG’s Center for Consumer and Customer Insight in partnership with Service Management Group (SMG) and Barkley.
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