Today’s millennials—nearly 80 million individuals in the United States alone—represent a staggering force in today’s marketplace, spending roughly $600 billion each year. And their impact is only expected to grow through 2020, with estimates their total spending in the US will top out at nearly $1.4 trillion annually. Despite this, most retailers today are millennial-challenged, largely due to their traditional focus and reliance on the spending power of Baby Boomers. They must perform the ultimate balancing act to appeal to their core shoppers—as well as those of their future.
Take Radio Shack. Reeling from the largely unsuccessful rebranding to “The Shack,” the company is now actively looking to upgrade its in-store experience and image (which most recently came in the form of provocative adsto garner millennials’ attention).
But this store and others make clear that the difference between “winning” and “losing” in today’s retail environment is really a matter of knowing how this demographic thinks, acts, shops. A key lesson:
Know your value and they will come
Millennials’ mobile- and tech-savvy behaviors have significant impacts on their shopping decisions long before they even enter a store. Unlike previous generations that struggled to price and comparison shop, millennials have it down to a science, using sites like Hukkster.com to find unique products and discounted rates at the click of a button.
To be clear, this reality is not borne from economic challenges alone. It’s this coupled with the fact that millennials—more than any generation before them—grew up surrounded by virtually endless choices and information at their fingertips. In order to succeed in today’s retail environment, businesses need to understand how their brands and products fit into the broader fabric of Millennials’ lives and then address those needs clearly and in a differentiated manner. What follows are three “rules” for retailers to do so—and successfully undergo a millennial makeover.
Beware of showrooming
For millennials, looking at products on the retail floor and then turning to the internet to make their actual purchase at the lowest price is a way of life. But retailers can’t afford to simply turn their stores into showrooms.
To survive, they must change their in-store experience—and fast. Far more than their predecessors, millennials value fun, engaging, and shared experiences with friends and colleagues. Some brands, including Kate Spade, Samsung/Galaxy and Adidas, have capitalized on these values by offering a “pop-up” retail experience, which features smaller formats and location changes to keep consumers guessing and involved.
Imagine if other “traditional” retailers, such as Men’s Warehouse—which is currently attempting to modify its image to appeal to younger consumers—considered this approach. By pulling back on the traditional store format and favoring the pop-up retail approach during, say, interview or graduation dates on campus, Men’s Warehouse could instantly create a whole new impression amongst millennials.
The sale doesn’t end at the register
For years and years, when we conjectured on brand marketing, the conversation invariably circled around delivery against functional and emotional needs. It was the right conversation for the time. But times are changing, and millennials are demanding an entirely new delivery lens, that of the engaging experiential. Specifically, these shoppers are:
- Looking for opportunities to connect with retailers and vendors of choice
- Seeking occasions to share those experiences and tips with their social circle, and even be the leading influencer among these circles
- More open to loyalty cards, with nearly 80% participating in such programs and being more likely to purchase from a brand with loyalty/rewards programs than those without
Finally, millennials tend to be more socially and environmentally conscious and are seeking retailers who take that larger perspective with them. Urban Outfitters, for example, one of the pioneers of addressing the needs and wants of millennials, offers an engaging blog with music, contests, videos and other assorted fun, even sharing suggestions on how to decorate your first apartment.
Know your role in the value chain
As we mentioned previously, to be successful with millennials, companies need to invest significant energy into not only understanding millennials overall, but understanding how their brands and products fit into the broader fabric of their lives.
Consider for example, Nordstrom. Recognizing it may not be the destination retailer for millennials, Nordstrom nonetheless speaks to this generation’s fashion sense by carrying highly relevant millennial brands, including BP, Savvy and Topshop.
The retailer understands these labels are not the singular brands of choice for millennials; rather, they fit into the broader fabric of the look millennials are seeking. Beyond making its clothing options on trend, Nordstrom also engages millennials with Instagram and Tweet outlets and offers “store within a store” options to enhance their shopping experience. Capitalizing on its role in the retail chain, Nordstrom also offers free shipping, free returns and equips salespersons in the store with point of sale systems to allow shoppers to check out faster and salespersons to engage with shoppers more.
Taken together, it’s a clear step forward in Nordstrom’s ability to cater to the broader fabric of millennials’ attire needs by providing the brands—and experiences—that matter most to this generation.
One store no longer fits all
Aligning a retail strategy with millennials requires one to reconsider all elements of the shopping process: pre-store, in-store and post-store. The format must be appropriately engaging and fun, and—absolutely imperative—the relationship with millennials must continue long after they exit the doors. This nurturing retailer-shopper relationship is a fundamental transition from the previously accepted transactional experience.
Retailers like Men’s Warehouse and Radio Shack that are currently transitioning to a millennial-focused strategy should look to companies such as the aforementioned Urban Outfitters. This retailer’s success has been realized in part by its unwavering focus on designing stores as true destination shopping experiences, a place with constantly new, unique and fresh merchandise millennials can’t wait to explore in-store. Augment such an in-store experience with an exceptional online presence, and Urban Outfitters realizes success every time. And it also reaps the rewards for its efforts, realizing earnings that consistently outperform peers.
Millennials’ influence on retail is not a question of if, just when. And like so many things, you have to ask yourself if you want to lead the way—or run to catch up.