Millennials Have the Most Buying Potential
Today, Millennials comprise the greatest volume of consumers of any demographic, beating out Baby Boomers who have long held that title. Although the Millennial generation has the most sales potential for marketers to capture, there appears to be a dilemma between the promising buying power and reality.
Millennials are not the biggest discretionary spenders as one might assume, furthering the mystery behind their spending habits. The salaries of Millennials are continuing to grow, yet this demographic has more debt in comparison to previous generations, meaning that there is less money leftover at the end of the month for spending on non-essentials.
Even with pay increases, Millennial spending is decreasing, as evidenced by a recent Gallup poll that shows 18-29 year-olds spend $20 less per day than the same age group did ten years ago.
As Baby Boomers continue aging, Millennials will inherit the greatest amount of assets of any generation ($30 trillion actually over the next 10 years), making it a clear focus for smart marketers when it comes to this increasingly-influential generation.
Millennials are Paying More to Clear Debt
The biggest reason for the current decrease -- and temporary, as the generational wealth transfer curve arcs up -- in Millennial spending is debt. Before Millennials even step foot onto their career paths, many are entering their career with a greater debt load due to school loans. The increasingly higher price of education makes starting out on their own more challenging for young people today than for previous generations. After paying for the necessities of daily life, contributing to healthcare, and student loans, there isn’t much left over to spend on dining out, travel and apparel.
Choosing to live at home longer with their parents means Millennials are spending less on home furnishings as well. As they postpone marriage, real estate purchases, and opt to have kids later in life, Millennials are subsequently delaying the purchase of things for both children and the home.
Millennials are paying more on bills and less on non-essential items like travel and apparel. A study from Bankrate reports that Millennials are dishing out 15% more on daily essentials such as food, gas and cell phone bills than older generations. With higher debt and increasing bills, it translates to Millennials having less cash to splurge on those lavish buys.
One-way Millennials are fighting the battle with debt is to rely more on cash or a debit card, or only have one credit card to use. This encourages Millennials to only use funds that they have in the bank versus living above their means on credit.
Millennials Appreciate Value and Minimalism
With Millennials, less is often more in all areas of life. A major reason retailers are seeing less Millennial spending is due to their minimalist lifestyle choices where obtaining a room full of stuff is less of a priority than for previous generations. Instead of collecting a bunch of material items, Millennials value spending more on experiences. Millennials are more inclined to rent items rather than purchase, leading to fewer dollars for retailers.
When Millennials are willing to fork out cash, they are focused on finding both a deal and quality in every purchase. Millennials may not be making regular luxury purchases, but when they do, they expect to find luxury at affordable prices. Millennials are more willing to shop online for deals compared to other generations. They are even more willing to buy luxury items at second-hand stores where they can get great value for a low price. A study by Statista found that 62% of Millennials are not afraid to mix and match budget and luxury items in one living space.
Going one step further in finding the best deal out there, Millennials are intent in using coupons wherever possible. Coupon usage is gaining in popularity with the rise of mobile apps which are simple to use and allow for easy access to discounts and rebates.
Millennial shopping habits may seem often elusive to marketers, but learning the how and why of their shopping needs as it continues to evolve over time will prove fruitful in the long run. This is absolutely not a short game -- and brands must understand that -- rather, an investment in the largest generation on the planet and the future impacts they'll increasingly have in culture, and retail's bottom line.
Millennials will no doubt continue to keep marketers on their toes as retailers focus on innovative ways to gain this influential group's attention, and dollars.