Millennials Aren't Buying What You're Selling
By Jason Busch
There may be no bigger collective group of change agents around today than millennials, the generation that dwarfs even baby boomers in terms of sheer numbers and buying power.
For all that millennials as employees are changing the way businesses operate, they're also affecting how companies sell products and services as a consumer group. And much like how executives and HR managers are still trying to figure out the best way to woo and retain millennial workers, retailers are scrambling to keep up with this new breed of consumer.
According to Micah Solomon, a contributor to Forbes, it's estimated that millennials will be spending $200 billion annually by 2017 and $10 trillion over their lifetimes as consumers, in the U.S. alone. And with millennials making up roughly 25% of the U.S. population, their buying preferences shouldn't be ignored.
Steve Noll, a marketing and social media instructor at Madison College, says the ways in which millennials are changing the retail industry go far beyond just choosing an online over a brick-and-mortar shopping experience.
"They have moved online for sure," Noll states. "And not just making single online purchases either. They are very comfortable with subscription-based products, anything that has a monthly fee. Older generations were skeptical of that, like with the rise of cable TV and the idea of 'paying' for TV. Today, many millennials have subscriptions to Netflix, Amazon, Pandora, Xbox Live, and many more services. Plus a cell phone bill and internet service, of course. So businesses are now looking at more subscription-based business models, things like Blue Apron meal deliveries. That's a huge growing industry for this demographic."
Noll notes millennials are much less skeptical consumers, as well, and are more willing than previous generations to give new business concepts a try. However, they also expect current businesses to be technology friendly.
"A local business should accept Apple Pay, for example," Noll notes. "If it doesn't, millennials see that as being 'out of touch.' Even though that's a new technology that's still rolling out, they don't have the patience and understanding why businesses wouldn't be investing in it. And they can afford be impatient, as there are many other options for them to go spend their money."
According to Noll, in the eyes of millennials an online business is just as relevant as a brick-and-mortar store, in part because they have less of a brand connection than previous generations. Millennials also do not like traditional advertising and are willing to pay a monthly fee to avoid it, a key issue for retailers to bear in mind when targeting millennials in ad campaigns.
The impacts of millennials' buying decisions are already taking their toll on once lucrative retail sectors for some pretty notable companies.
Nike announced just this month that it would no longer sell golf equipment, citing sales declines largely driven by a steady drop in younger participants as a primary reason for the move. According to the National Golf Foundation, the number of U.S. golfers dropped to 24.1 million in 2015 from a peak of 30.6 million in 2003.
Much of that decline can be traced to the waning career arc of Tiger Woods, but the sport's high cost and time-consuming nature are also frequently identified as reasons why millennials just aren't taking up the sport. In fact, in the past two decades the sport's participation rate has dropped 30%. In the United Kingdom, where modern golf was invented, the average age of regular, once-a-week players climbed to 63 in 2014 from 48 in 2009.
Noll is blunt when he says golf's problem is the game itself. "It's a slow game. Millennials like more action and stimulation. They grew up on video games and skipping commercials on DVRs. A four-hour walking game with little actual action just doesn't hold their attention."
Noll actually has a phrase for this phenomena: stimulation addiction. "It's not a disease or disorder like ADHD. It's a lifestyle. And right or wrong, industries must cater with this in mind. Golf companies, as an example, need to rethink their product offerings."
Of course, golf is far from the only industry having to give itself a long look in the mirror. Symphonies and operas are suffering from declining receipts, and malls - once a go-to spot for young consumers - aren't as busy as they used to be. Noll explains why bars and clubs are especially being hurt.
"Why go out and spend money on drinks just to meet someone to date when Tinder and all those other dating apps are just a swipe away," Noll asks. "And remember, those apps can have a small subscription fee to get rid of the ads, which millennials are perfectly fine with paying. Their discretionary income is going to monthly service fees to give them more convenience. Time is their most valuable commodity."
As retailers have moved to respond to the way in which millennials buy, older generations are feeling the effect and actually changing their buying habits to better conform to the new normal.
A retail stalwart like Wal-Mart just bought Jet.com so it can better compete in the online area, notes Noll. This type of investment shows that businesses know that online shopping is going to be the main outlet for many generations.
"Netflix is spending millions of dollars on original content," comments Noll. "Hollywood is now catering first to the international business and second to domestic. The most buzzed about entertainment this summer was not a theatrical movie, but a Netflix series - Stranger Things - that millennials embraced. And it's set in the 1980s, a decade that millennials continue to claim as their own."
Other industries outside of retail have also followed suit. Banks no longer need so many physical branch locations, for example, but do need an app that provides mobile deposit to be relevant with modern consumers.
So how can retailers best court the millennial customer and their dollars?
"Retailers need to pay attention, but not do knee-jerk reactions to fads," advises Noll. "They must look for long-term trends and move with them. The success of Pokémon GO shows huge promise in developing augmented and virtual reality entertainment. But it's way too soon to know how and if this will catch on."
Noll says one way for a local business to benefit from the Pokémon Go trend - and capture the attention of millennial consumers without making an investment it might later regret - would be to hold a Pokémon event now but wait on developing its own AR or VR offering.
"Retailers also must remain open minded," Noll says. "There's still a lot of a 'that's not how I did it back in my day' attitude among business owners. This is a critical mistake. The young generation has no respect for that type of attitude and they can turn their loyalties on a dime if they see it. There are way too many other businesses offering similar products. Retail today is the millennials' sandbox. We just get to play in it."
While much of this information has been shared in segments, this article shows the impact of the Millennial Generation can have. The example on Nike and the Golf Profession is huge.
This article submitted by guest contributor Dr. Fred Staedel