Should department stores talk less about Millennials and more about ‘heavy spenders’?

Discussion
Photo: RetailWire
Dec 22, 2016
Matthew Stern

There’s more than one way to slice the demographics when it comes to identifying who is spending the most in department stores, according to a new study.

Instead of focusing on Millennials as a sought-after demographic, the study by Viant, a subsidiary of Time, Inc., defines the most important department store shoppers as “heavy spenders” and explores the characteristics of this group. Heavy spenders exhibit three main characteristics:

  • A tendency towards gift-giving, with a 29 percent greater likelihood to be shopping for a gift than other customers;
  • A desire to shop and return through multiple channels;
  • A tendency to shop via smartphone.

In terms of media consumption, heavy spenders tend to stream online content and are 70 percent more likely to own a Smart TV than lesser spenders.

The study splits out heavy spenders into three subcategories:

Digital Introverts: This category accounts for 16 percent of all department store shopping, spending nearly three times more on average than a standard holiday shopper. Surprisingly, members of this segment do not enjoy shopping in department stores. Rather, they pursue shopping through digital channels. Digital introvert status does not skew towards one demographic.

Dads (or parents, with 61 percent trending as male): This category plans in advance for shopping trips and relies mainly on online research for product information.

Convenience Shoppers (67 percent female): This category consists of shoppers who like to get in and out of the store quickly. They appreciate available clothing sizes, well-organized merchandise, store location, a good return policy and easy parking.

Respectively, the average amount each segment spends during the holiday season is $665, $617 and $576.

The study sees focusing on specific shopper segments and recognizing “different personality types” as key to effectively serving customers. It suggests taking steps such as using CRM data to arrive at this fuller view of the customer segment.

Some retailers appear to be moving toward making these kinds of more granular distinctions between shopper segments, rather than lumping together an entire age cohort. For instance, J.C. Penney recently described its emerging customer base as “Millennial moms,” and has been tweaking its product assortment to address the needs of that segment.

DISCUSSION QUESTIONS: Should department stores consider retooling their offerings to reach the three sub-categories of heavy spenders, and what should they do to reach them? How important is it for department stores to base their offerings on data-driven, granular understandings of who their customers are and how they behave?

Braintrust
"You always want to take care of your best customers. But you can't ignore a trend of an emerging group of customers."
"Technology has leapfrogged classic market research and niche marketing by successfully allowing retailers to go after a segment of one..."
"The fact that we have yet another consumer taxonomy that clearly misses the point tells us almost all we need to know..."

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20 Comments on "Should department stores talk less about Millennials and more about ‘heavy spenders’?"

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Shep Hyken
BrainTrust

You always want to take care of your best customers. But you can’t ignore a trend of an emerging group of customers. Data will show you the trends and a lot more. Focus on cultivating deeper relationships with the existing demographics, sub-categories — whatever you want to call them — of your best customers, and recognize and build on what is trending to what will most likely be new categories of customers.

Cathy Hotka
BrainTrust

All this is fine but it misses the point. The whole shopping trajectory is being turned on its head by customers who prefer shopping from smartphones to trolling malls, and who value convenience and transparency above all else. Retailers who think up new ways to engage with these customers will do very well.

Jasmine Glasheen
Guest
Jasmine Glasheen
9 months 27 days ago

I fall into the “convenience shopper” as well as the Millennial category. Neatly organized, easy-to-find merchandise is critical. In-person holiday shopping is disorienting. People buy when they’re comfortable. I want to be (calmly) greeted at the door with clear signage guiding me towards the merchandise I seek.

None of the three big spending types mentioned above appreciate frenetic greeters yelling “Merry Christmas.” When I went to Metro Market yesterday, there was a posse of greeters at the door. They were aggressively friendly and I went the long way to avoid them on the way out. I’m not a Scrooge, but I prefer to choose my holiday dialogue. I don’t want it forced upon me by strangers when I’m running in to pick up some tea.

Anything that impedes the modern shopper’s expedience is a detriment to sales.

Gene Detroyer
BrainTrust

The department store has to reassess its business model. It is not a matter of drawing certain demographics or psycho-graphics to the store, it is a matter of designing a retail environment that reflects whatever the future of retailing is. The Millennials will give the department store a pretty good indication of that future. Don’t try to bring this group to the store, bring the store to this group. Yes, it’s easier said than done, but that is what every failed retailer in history has failed to do.

By the way, today is December 22 and all the Christmas shopping is done. Some of the presents are already wrapped. Neither my wife nor I stepped into one store this holiday season. NOT ONE!

Dick Seesel
BrainTrust

Millennials should not be treated as a monolithic group of customers but department stores do need to reach them. That being said, any worthwhile customer relationship program should know how to identify and cater to a store’s most loyal shoppers first — whatever demographic bucket they belong to.

Anne Howe
BrainTrust

Demographic segmentation is just not powerful enough anymore! Retailers have enough data and hopefully enough marketing talent to sort customers by their attitudes, beliefs and behaviors. And they should be listening to various segments to find out what will make them shift behaviors and spend more. It might be enough to offer them more access and convenience versus price. It might be special hours with very talented design/shopping assistance available. It might be access to all inventory online and one-day free shipping. It’s a complex grid but worth doing. It all starts and ends with relationship, and that means having the guts to LISTEN and RESPOND!

Tony Orlando
BrainTrust

Heavy spenders at one time were the same folks who walked into your store one day and were greeted with a smile. They had all of their needs taken care of in a manner much better than the competitor’s store they shopped in as well. Guess what happened? Next thing you knew, they became one of your heavy spenders. I know this is almost too simple, but believe me, if you want a heavy spender then you must treat them extremely well and exceed their expectations on the product you are selling and, more importantly, the service you provide, and you will have that heavy spender for life.

Yes I understand online is different, but how you handle an online order can make or break a future heavy spender as well, just look at Amazon. Merry Christmas everyone.

Ryan Mathews
BrainTrust
The fact that we have yet another consumer taxonomy that clearly misses the point tells us almost all we need to know about why department stores are challenged. As Jasmine points out, these categories are hardly exclusive and one wonders what the value of an organizing system is if it … well … doesn’t organize. And beyond that the categories don’t make sense. Why are digital shoppers “introverts”? What’s the difference between a “Dad” — gag me, sorry — who plans his/their shopping trip to minimize store dwell time and a “Convenience Shopper” who wants to get in and out? This whole structure seems to be full of distinctions without differences. Department stores need to make the leap into the 21st century and get to know their customers better. Analyzing customers by spend can easily become a death spiral since it often identifies “the best” of a declining group of customers. Every A&P customer study I ever saw said customers were very satisfied with the stores, but nobody bothered to note that the number of customers was in decline. And of those “very satisfied” customers one could identify the top quartile or decile of spenders. But that’s like measuring the… Read more »
Ralph Jacobson
BrainTrust

There’s actually not much “new” news here. Every retailer has always found that it is far more productive to keep existing, good customers than it is to court new customers. That’s really what this story is all about. Retailers need to take the time to know their customer base, and I mean REALLY know them. This means to employ the very latest analytics tools to define who your target audience should be, rather than necessarily who it may be right now.

Jeff Sward
Guest

This sounds like exactly the conversations department stores should be engaging in. After all, they are “department stores” … different departments talking to different consumer profiles. Specialty stores have the luxury of being highly focused to begin with. They have the luxury, hopefully, of a well-focused brand promise. Then it’s a question of executing in an omnichannel environment. Department stores, by their very nature, operate under a bigger umbrella in terms of their brand promise. By definition, they then need to focus and refine based on customer profile, whether it’s demographics, psycho-graphics, or “heavy spenders.” Anything that becomes a differentiator in the eyes of the customer and gives the retailer an edge is a plus.

Mohamed Amer
BrainTrust

On a macro level, retailers need to understand consumer demographic trends. Appropriate niches within the trends have traditionally helped to refine the offering and message. Even more important today is technology’s ability to identify and support one-on-one communications between retailer and consumer.

Like any other retailer, department stores face those same realities. However, theirs is more extreme since they have lost their destination status as a one-stop shop to the specialized competitors. Digital websites and marketplaces have become the new destinations and are top-of-mind for shoppers.

Technology has leapfrogged classic market research and niche marketing by successfully allowing retailers to go after a segment of one across all customer touchpoints. Department stores simply have more headwinds than other formats and have to simultaneously solve multiple difficult challenges: inventory, legacy systems, real estate costs, staffing and organizational structure — while making this fundamental change to their business model.

Gary White
Guest
9 months 27 days ago

What is a department store? Why is this format needed? What advantages does it supply to the customer that they can’t satisfy easier, faster and in a more reasonable way?

Department stores have always created a temple to themselves with rituals and habits that are not holding the customers interest and time.

A model change is long overdue and the changes made with the customer in minded can’t be fake. Good luck.

Brand leaders are good at two of — and the best at one of — these three things: customer experience, price leadership and innovation.

Camille P. Schuster, PhD.
BrainTrust

It is incredibly important for each retailer to identify its most valuable consumers — defined as is appropriate to the retailer — such as highest spender, biggest influencer or most visits. Retailers must figure out who those people are and what is important to them and create their plan with them in mind. That is more important than using any generic labels.

Peter Charness
BrainTrust

Department stores, by the nature of their size and positioning, have to attract a broad range of customers. At the most fundamental level (which seems to be frequently forgotten) they have to have product collections that their customer (segments) want to buy. The importance of buying and assortments seems to be often forgotten these days. There’s a difference between “what” a customer wants to buy, and “how” they want to buy it. Too often we worry about the how (smartphone, online, in-store, etc.) and forget the fundamental importance of the what. Without the right products there is no how.

Craig Sundstrom
Guest

If this unintuitive and data-to-the-nth-degree method is how department stores approach things, it’s no wonder they’re in trouble. Yes, of course it’s more important how much someone spends than how old they are, but isn’t the basis for concern over Millennials that an entire generation is coming of age that has no interest in them?

This sounds like waving the white flag: we’ll sell to who wants to buy (now) and forget about cultivating future customers.

Martin Mehalchin
BrainTrust

Lots of great comments on this one. The overall point that Millennials are not a uniform segment is valid but also not a new finding by any means. Using behavioral and attitudinal data to segment and target is a step in the right direction but it’s not enough. As other commenters have pointed out, department stores need to revisit their entire format and business model to define an experience that is more relevant and compelling in today’s retail landscape.

Lesley Everett
BrainTrust

There is of course a need to continually understand what different demographics of shoppers need. However, surely everybody still wants to feel good and feel valued when they enter a store and when they purchase. We’re all human beings and the customer experience is as important to a Millennial as to a “heavy spender,” and by the way the two are not mutually exclusive!

Lyle Bunn (Ph.D. Hon)
BrainTrust

Since most department stores do not know who the heavy spenders are, let alone from department to department until a check out, cross-promotion is of critical importance to maximize per-visit revenues. In-store media serves to convert shoppers, cross-sell and upsell while delivering branding that will keep them coming back. Shoppers are shoppers all year round if the ambiance is right and their experience is a positive and emotionally exciting one.

Mark Price
BrainTrust

In our experience, the best predictor of a customer’s future behavior is the past behavior. Behavior is far more predictive than demographics, we find consistently. There are millennials who shop heavily with a retailer and those who do not. The ones who do may have behavior patterns similar to other best customers and should be treated similarly for data-driven marketing.

Brand building may want to account for demographics more heavily, but data-driven marketing is about specific behavior change, and needs to focus on behavior as the key.

gordon arnold
Guest
Living in a densely populated area within the Unites States of America one may order anything they want shipped to anywhere they want so long as the buyer and seller are connected to the internet. It has been this way for quite some time and will most likely continue for a long while with or without the internet as we know it. While the customer side of this evolution in buying ability and practice grows exponentially every month the sellers are still stuck in the mud. Addressing customer needs as a priority should yield increases in stability and growth. But today this is simply not the case. In fact it may be the single most significant reason for brick & mortar and e-commerce retailers to be widening the connection gap. Today’s discussion looks at identifying buyers by ticket sizes. I see this as another guess in light of how little we know about the 21st century consumer. A look at what we see in sales reports with some in-depth scrutiny may show fluctuations in sales and profit taking that demonstrates a lack of market awareness in either direction, as in client to store or store to client. Inventory details should… Read more »
wpDiscuz
Braintrust
"You always want to take care of your best customers. But you can't ignore a trend of an emerging group of customers."
"Technology has leapfrogged classic market research and niche marketing by successfully allowing retailers to go after a segment of one..."
"The fact that we have yet another consumer taxonomy that clearly misses the point tells us almost all we need to know..."

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