The millennial generation is easily the most studied demographic since their parents, the Baby Boomers. This is not only because Americans are always fascinated by youth culture, and that millennials are growing up during a period when technology and economic forces are changing rapidly, but also because—to put it bluntly—Gen Y represents big bucks. Roughly 80 million American millennials spend $600 billion annually, and by 2020, it’s expected this generation’s spending will hit $1.4 trillion per year, or about 30% of all retail sales.
No wonder retailers, marketers, manufacturers, and all kinds of consultants have been trying so desperately over the years to get inside their heads and find out what it is that interests them—and what they’ll pay for.
Recent studies from the NPD Group, Accenture, and the Shullman Research Center offer some insight as to what drives millennial consumers. In a press release accompany the NPD report, Marshal Cohen, the group’s chief industry analyst, called millennials “the most elusive generation and the most challenging to keep engaged.” While some of the findings in the studies from NPD and others may be surprising, and demonstrate important cultural differences between how millennials and other age groups spend, simple economic circumstances can be credited for much of what sets young consumers apart. For instance, why is it that millennials go shopping quite frequently, but purchase at a significantly lower rate than older consumers? “Because they are the most selective as well as the most economically challenged,” Cohen put it simply.
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Here are a few more findings about millennial consumers gathered from the studies:
Millennials really love to shop. Indeed, in the Shullman study, 58% of consumers ages 18 to 33 put themselves in the “love to shop” category, compared to 40% of adults overall. And while the data indicates that millennials are more likely to make online purchases than older consumers, young shoppers still do enjoy going to stores. According to the NPD report, 53% of millennials shop in-store at least once a week, and 81% of their dollars are spent in brick-and-mortar stores. “Interviews conducted recently at one of America’s largest shopping malls confirmed our survey findings that many members of the digital generation actually prefer visiting stores to shopping online,” the Accenture report states.
Millennials purchase less frequently. Young consumers may be out at stores in large numbers, but they’re not necessarily buying anything. According to the NPD study, the conversion rate—percentage of consumers who actually make a purchase—is lowest among millennials. Whereas seniors make purchases 72% of the time, millenials pull the trigger only on 57% of their shopping (more like browsing) ventures. Gen X and Baby Boomers fall in the middle, with conversion rates of 66% and 69%, respectively.
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Again, part of why millennials are so different than older consumers may come down to simple economics: Young consumers, who are either just starting off in careers or are struggling to find work, are likely to have more time than money on their hands. So they have ample opportunity to shop around and check things out before making purchases—or just deciding that they’re not in a good enough financial situation to buy.
Even well-off millennials aren’t big splurgers. The Shellman study, which focused on young consumers with household incomes of at least $75,000 annually, found that for 53% of higher-income millennials, their last “luxury” purchase cost under $250. What’s more, these consumers were fairly likely to wait and save up before buying anything in the luxury category: 30% reported saving up specifically for the purchase (compared to 16% of adults overall), and only 10% of millennials put the purchase on a credit card (compared to 19% of adults overall).
They’re big fans of convenience and cheap prices. It’s easy to see economic forces at work yet again in light of the NPD study’s findings that “value oriented retailers within the dollar store, second hand, drug store, and off-price channels” are especially appealing to millennial shoppers. Another study, “Millennial Shoppers: Tapping into the Next Growth Segment,” released last summer by SymphonyIRI, indicated that millennials tend to be driven more by cheap prices than loyalty to any particular brands, and that they like shopping in drugstore chains like CVS and Walgreens more than other consumer demographics.
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The SymphonyIRI survey also showed that millennials have been resorting to classic DIY strategies in order to spend less money, sometimes—in the case of health care—to disturbing degrees:
This group is 46 percent more likely to use at-home beauty treatments to save money, and 31 percent more likely to cook from scratch or with limited convenience foods to save money. They are also 18 percent more likely to “self-treat” where possible to avoid spending money on doctor’s visits.