Study: Millennials to Shake Up Supermarket World
Millennials are on their way to replacing Boomers as the biggest consumer group and and the change is likely to cause havoc for grocers, according to the study, Trouble in Aisle 5, from Jefferies, the investment bank, and AlixPartners, the advisory firm.
The challenges for food sellers will start peaking in 2020, when Millennials over the age of 25 (the age at which income and household formation typically start to really accelerate) will make up roughly 19 percent of the U.S. population and their food-at-home spending amounts to $50 billion annually. By comparison, annual at-home food spending by Boomers could fall by as much as $15 billion.
The potential problem is that Millennials have "strikingly different" attitudes toward consumption versus Boomers.
"Convenience is king with Millennials — they expect to get what they want, when and where they want it, and they know they have options for both products and retailers," said David Garfield, managing director at AlixPartners and head of the firm’s Consumer Products Practice, in a statement.
Millennials are also much less loyal to both food brands and traditional grocery stores, and much more willing to explore different distribution models (online shopping, mobile shopping, delivery, etc.) and spread their shopping across different channels (mass merchants, clubs, drug stores, convenience stores, online, etc.)
According to an accompanying survey of 2,000 adult grocery shoppers over the age of 18, 47 percent of Millennials stated brands were "extremely" or "somewhat" important in their purchasing decision for groceries, compared to 61 percent of Baby Boomers. Similarly, only 41 percent of Millennials’ total food spending is at traditional grocers, compared to 50 percent of Baby Boomers’ spending.
Finally, at least in their younger years, price is most critical for Millennials. Among Millennials earning less than $20,000 per year, 75 percent cite price as "extremely important." As income rises, attributes such as product quality, healthy and natural/organic increase in importance. Broadly, the study also found that Millennials require a smaller discount to purchase private-label products versus Boomers.
For traditional grocers, the study finds that there appears to be a need to redefine their model, focusing on perishables while engaging or re-engaging customers in the center store.
"While Millennials have yet to lock in their preferences for a lifetime, they are clearly much less loyal than their forebears to the ‘one-stop-shop’ supermarket format, creating significant obstacles for traditional retailers," said AlixPartners/Jeffries’ statement. "But trouble for the grocery store looks to be a boon for specialty retailers, mass merchants, club stores and even online purveyors of everyday items."
Discussion Questions
Discussion Questions: How much different are Millennials at their ages today than Boomers were when they were the same age? What adjustments to grocery retail may have to be made prior to the Millennial generation’s arrival as the U.S.’s primary shopping group?
Each generation differs from the ones preceding it. For many years retailers and brands made adjustments for boomers. Now they need to do the same for Millennials. That said, today’s Millennials are not the same as they will be 8 years from now, when they have families and different jobs.
We’ve already seen a trend away from the one-stop supermarket. Companies like Trader Joe’s, which offer a limited selection in a congenial atmosphere, and lower prices, will benefit. Maybe we’ll even see successful efforts to launch online grocery stores.
Retailers should wisely consider the preferences of Millennials, how they shop and their preferences, and adapt accordingly.
Um … let’s see … young people with limited incomes are more concerned with price than bloated capitalists whom have successfully crawled their way up the economic ladder. Check!
Um … let’s see … baby boomers are less motivated by convenience than Millennials. Er … rewrite conventional wisdom on the rise of c-stores, QSRs, microwave foods, rise of foodservice, etc., etc. to reflect all those boomers (not capitalized BTW) who have been secretly meeting in the woods at midnight to enjoy sit down meals together Check!
One-stop shopping is suddenly an endangered concept. Eliminate the part of the official history of retailing having to do with format proliferation starting in the 1970s. Check!
Um .. let’s see .. people exercise options, but only when they are available. Er … people didn’t use cell phones or buy off the Internet before they were invented. Check!
Um … brand loyalty builds over time so older people are more likely to be brand loyal than younger people. Check!
Um … stop confusing what’s new to you with what’s new. Check!
Whenever someone brings up the subject of “generational differences” this is always the first question I pose: “Do you mean fundamental differences — or simply that they manifest their life stage in a different way than the generation before?”
When examined this way, the conclusion is quite often that it isn’t so much that the generations are really “different” than we were at the same point in our lives. Fundamentals like maturation, child-rearing, career, etc., take over and drive very similar needs at similar times, regardless of the generation.
But the technologies available and other macro trends (environmental awareness, focus on health, savings versus debt accumulation) also play on us all. And the younger generations are typically the early adopters. Did my kids start using Google and Pandora before I did? Sure. But are Boomers embracing these technologies in a big way as well now? Uh huh.
So are Millennials “fundamentally different” from Boomers? Not so much perhaps. Are their behaviors such that micro research projected to macro conclusions might cause us to think so? More likely the case.
If we take Millennials as those born 1980-2005 (based on Wikipedia’s definition), only about 1/3 have been around long enough to have households, to be doing regular grocery shopping, etc. So I’m betting we have no clue as to whether they’ll be different in a meaningful way from today’s Boomers.
Everything has already changed. Baby boomers had 2 or 3 children and started having them in their early twenties. If Millennials have children the first is likely not born before age 25. Furthermore, Millennials will probably follow the childless by choice trend set by GenXers who are more than twice as likely as Boomers to not have children. Children have a great impact on grocery choices made and overall family grocery spend.
The latest generation of consumers has in fact expressed itself as not loyal to either brand or outlet, and this should not be a surprise to anyone. Millennial’s are forced to secure a habitable lifestyle with far less buying power than what the Boomers had in their beginnings, in an economy that is hostile at best to newcomers. This is why non brand and non product suppliers like Yahoo, eBay, Groupon, and others are taking off in popularity and use. This is where the Millennial’s can get what they need and want at an affordable price. This new trend will most likely continue throughout their existence and be handed down to the next generations that they will directly influence. Awareness is the first step in problem solving for any business.
For Boomers, it was location, location, location. For Millennials, the mantra is: attention span, attention span, attention span. “Sound bites,” “sparkly, shiny things,” “momentary social channel fads,” etc., are the driving forces today. Stores must take those very disloyal, fickle shoppers and capture their attention with an immediate gratification in their product. Not easy.
Perhaps a better question is, “What remains the same?” Boomers in their late 20s compared to Millennials in their late 20s today are in a world of difference.
If they have a job, they are likely to have shifted careers/positions a few added times. They are in more diverse industries, many of which did not even exist 30 to 40 years ago. They are in different stages of life events — boomers married earlier and more frequently, and formed families and housing units ahead of the pace of Millennials.
The stores that they shopped look and function differently. Far more SKUs exist today, in stores that are 2 to 3 times the size of grocers 30 years ago. Share of stomach experiences are different today, with Millennials having grown up with dining out experiences that simply were not as normal for Boomers and their young families.
Media and Media Influence on Purchase is dramatically different today. A Boomer in their 20s had newspapers (31.5% of all media spend in 1975 went to Newspapers), TV, Radio, Magazine, and Outdoor. Today, the Media and In-Store experience has over 30 different media forms that are working to capture consumer attention.
The message: Best that grocers (and other retailers) do not look back too often to a Boomer when they were in their 20s, 30s, and 40s. Look forward to where the Millennials and the Boomers are headed today.
Beyond the obvious obsession and reliance on technology, Millennials are likely to be even more price conscious than their parents given that many of the first impressions of the “real world” is one of high unemployment and the resulting low confidence levels of the economic environment.
While many retailers are on the right track to develop new technology-based customer touch points, I feel that few are are taking the BOLD steps necessary to “catch up” to Millennials and their expectations. For example, more needs to be done in the way of transitioning paper content to digital. Retailers also need to get past their past aversions of sharing aggregate customer data with content partners, that will enable the ROI on these new technologies to be realized.
And finally, if you are going to be Millennial-centric retailer, you had best develop access to what you are selling online and offer the mobile and e-commerce tools necessary to complete the transaction…if not, Millennials will surely find someone else who does!
I’m having trouble synthesizing all the claims into something coherent: “convenience is king” but they are “less loyal…to the ‘one-stop-shop’” and “spread their shopping across different channels.” To me the second two claims seem to belie the first. And I think more important than generational differences will be the overall economic picture: will we return to the pattern we saw from the 1940s – 1980s (large growth in median household incomes) or continue as we have the past 10-20 years (stagnation)? Without settling this basic issue, all theorizing about “typical” household behavior is wild speculation.
For one thing, Millennials hate the existing center store — we did a study with over 1,500 Millennials (Grocery’s Next Generation) and they consider the center store a place where all the “unhealthy” goods are. That’s bad news for a lot of CPG companies and traditional grocers.
In sum, the next generation of prime shoppers wants more experience, less rote. Let the remodels begin!
From the hoards of reports on boomers vs Millennials and from real-life experience with these critters are not attached to the brand elements as much as we (boomers) were. Why? Marketing. Millennials grew up in a time of more and more personalized marketing delivered in unique was — via MTV, video games, the internet, and more. We B’s knew what brands our family used and we depended on them.
As these Millennials (M’s) shift into the key shopping group the grocery space needs to monitor the trends that are influencing the M’s and align their assortments accordingly. They also need to be able to create shopping environments that the M’s EXPECT. This EXPECT factor is driven by the shopping and health trends, social channels, and those darn marketing people.
Giving up the great stores us B’s created will be tough to do…. :>)
Millennials are extremely different than their generational counterparts. The economic situation is dictating how and where they live. They are more connected and thus better informed and more demanding of their retail experience. In fact, in a recent SymphonyIRI study, 40% of Millennials described themselves as deal hunters (they use coupons, smart phones, and research their shopping trip — less impulsive than their counter parts).
Technology will play a major role in their shopping behavior and retailers that have evolved their services will win the Millennial business.
Having been brought up with instant communication and multiple channels, Millennials are more shrewd about choice than Boomers were at the same age. Crowd funding, mobile and the ability to band together quickly for change has spawned a generation that is driving more ways to achieve more fulfillment from shopping than prior generations. This means more than a good price or good value, it includes community and making a difference.
I am not from the grocery business and cannot voice the more subtle arguments that come from knowing a certain business. I am from a mix of fundraising and loyalty and know the programs in place today for almost-an-incentive concepts like points or pennies off gas must change to appeal to this new breed of shopper. The program must be centralized at POS and sophisticated to apply cash rebates by SKU and work seamlessly across brick-and-mortar, mobile and e-commerce. Customers must be able to direct a portion of their cash rebate to the cause of their choice and receive something themselves. This more cerebral (and profitable) and customer-centric type of program will keep the grocer more top of mind, and conceivably, reduce the need for coupons and inserts as they are used today.