Why Aren’t Millennials Big E-Spenders?
According to NPD Group, Millennials have the lowest shopping conversion rate of all generations, but the bulk of their retail dollars is spent in-store rather than online.
Millennials spent 81 percent of their shopping dollars in brick and mortar stores and only 19 percent online. And even though they only convert a little better than half the time, at 57 percent, 53 percent of Millennials shop in stores in a typical week.
"Millennial shoppers have the lowest shopping conversion rate because they are the most selective as well as the most economically challenged," said Marshal Cohen, NPD’s chief industry analyst, in a press release.
"Millennial shoppers are the most elusive generation and the most challenging to keep engaged. In order to get more Millennial consumers in store, retailers need to understand how Millennials’ shopping habits differ from other generations. Previous generations were more easily impressed by marketing and advertising strategies. With this group you must have a strategy to grab their attention in- and out-of-store," concluded Cohen.
Generally defined as being born between 1980 and 2000, Millennials’ low in-store conversion is to be expected considering their current age and earning power. And it makes sense that value-oriented retailers like dollar stores, second hand stores, drug stores, and other off price channels are attracting more Millennials, with dollar stores and second hand stores getting the best conversion.
A recent Times and Trends Report from IRI, Millennial Shoppers: Tapping Into the Next Growth Segment, shows how Millennials have been affected deeply by ongoing economic difficulties, and have adopted an exceptionally conservative — i.e. frugal — approach to daily living. At the same time, they highly value the fun factor of shopping, and will use social media and smartphone apps to search far and wide for deals.
It seems paradoxical for a group also considered the first native digital generation to be doing so little buying online. But according to a report by Accenture, Who are the Millennial shoppers? And what do they really want?, the assumption that it’s all about online shopping is Myth #1. Through multiple surveys in multiple countries, the findings revealed that this digital generation of roughly 80 million in the U.S. that spends approximately $600 billion, actually prefers visiting stores to shopping online. Put simply by one Millennial interviewee, "You want to touch it; you want to smell it; you want to pick it up."
- NPD Group Reports Most of Millennial Dollars are Spent in Stores vs. Online – NPD Group
- Report: Millennials least likely to turn store visits into purchases – L.A.Times
- Millennial Shoppers: Tapping Into the Next Growth Segment – IRI
- Who are the Millennial shoppers? And what do they really want? – Accenture
Discussion Questions
Do you agree the assumption that Milllenials are born to become avid online shoppers is largely a myth? To what degree is their life stage and income status holding back their online spending?
Millennials above all want to be engaged in an authentic experience. Because they don’t have the big bucks themselves, they are indeed more selective. I don’t agree they are all deal obsessed but if the retailer touts only deals, expect those Millennials to wait, just like their grandparents did with J.C. Penney.
The Millennials leverage technology for communication better than any other age group. That’s where the tech savvy comes into play. The financial challenges of that group also drive lower online purchasing. I do think, however that the one statement by a survey participant, “You want to touch it; you want to smell it; you want to pick it up” is the same case for all age groups, and therefore will be the reason physical stores will never die.
This is nonsense. It is meaningless to characterize a vastly heterogeneous group with a single number like this. The differences among Millennials (when it comes to online buying or any other behavioral trait) are huge, these within-group differences swamp the differences in the average tendencies across generational groups.
We should always avoid the temptation to paint a heterogeneous group with a single brush. Otherwise we will jump to conclusions (as in this article) that can lead to some inappropriate (and financially unwise) decisions.
Not a myth. Will happen with maturation of life and income. In the meantime, don’t lose sight of their social media orientation when communicating with this rising generation.
Millenials are explorers, hence the low conversion rate and the appeal of discount stores. Online shopping is part of the experience and bargain hunting is a reality of the economic times.
I have 2 daughters and a son that are Millennials and I can tell you how they shop. First of all, many of their college graduate friends are unemployed or under employed. According to the US Dept of Labor, the unemployment rate for Millennials was 13.1% in January. The “real” unemployment rate for this group is 16%. So they don’t have the money.
Second, genders shop differently. My son does more online shopping than my daughters. But for clothing, they all still prefer in-store shopping. Anything else, they’re buying online. My daughters love Groupon and Amazon. My son also likes Amazon, but he doesn’t go for the coupon gimmick, he prefers overstock and other online stores where he can just buy something quickly and inexpensively and move on. They also go online to buy what they need. They don’t really spend time browsing at other items.
Regardless of if they are shopping in the store or online, they do prefer a fast experience. They are on the move and would prefer to be having fun with their friends rather than shopping. They don’t actually like to shop. But that, they may have just gotten from me. 🙂
Millennials are the SOCIAL generation…they like to be with friends and be around people. They like to go places, they like the “experience” of being there. Us oldies—we like privacy and getting away from the noise. My read is that Millennials were born to take the desktop with them via their phones/pads and shop and be digital at the same time. Retail action in the next few years is all in the store…but the action gains momentum via online.
Want Millennials to buy more? Re-do the stores for their generations—just like the way you re-tune a website.
Let them go hit the stores….I will hide at home and track their buying habits or locations via my GPS monitoring systems.
Tom…totally un-social….
We think Millennials are isolated texting loners, but the truth is they value real five and six sense connections. Life, they know, is not some soulless mechanical series of transactions. Come to think of it, no one really wants to live virtually and the sooner retail drops that misbelief, the more meaningful, passionate and profitable it will become.
The online experience is part of the overall shopping process. For many Millennials, it’s an integral part of the process, particularly for new and/or larger-ticket purchases. Whether the actual purchase is made in the brick-and-mortar store or online should not negate the importance of making a powerful online connection with Millennial shoppers.
What marketers must consider is that each Millennial will have a different way of using and interpreting digital media content. Therefore, it is absolutely critical to tightly target online efforts just like offline efforts to the needs and wants of the key and target shoppers.
It seems to me that too often we forget the simple fact that today’s “Millennials” are really just an age group that we all went through as gen-Xers, boomers, or greatest generation. Remember those years? Girls and young women have *always* liked to shop as a sport and to go try on clothes and laugh with their buddies. Sometimes they buy and sometimes not, but the camaraderie, style opinion, and the all important verification of “no that doesn’t make you look fat” is something they need and something they just can’t get online.
It should surprise no one that this age group heavily utilizes brick and mortar establishments, whether it’s Macy’s, H&M, or thrift/vintage stores.
It’s not a myth, but online shopping requires one thing that many Millennials don’t have, and that is credit. Have you heard about the recession/depression and the unemployment rate? These people don’t have enough income to qualify for credit cards. No credit—no online shopping! Also, this might lead one to the conclusion that “dollar stores” are a good place to invest as the economy isn’t getting any better.
This is an interesting article on the heels of yesterday’s post from my interview with Hointer’s CEO, Nadia Shouraboura. It seems as though she’s hit the sweet spot: reinvigorate physical retail through technology and bring mobile-centricity into stores rather than focusing myopically on traditional “e-commerce.”
As others have already pointed out, Millennials are not at all homogenous. The younger Millennials were clobbered by the great recession as they were coming of age. The idealism they were raised on met a cruel reality: Hard work and preparation would not assure success after all. Older Millennials, on the other hand, probably think and behave more like GenX than their younger counterparts.
This assumption can be validated with the popularity of pop-up shops and food trucks among Millennials.
The challenge is for retailers to focus on in-store innovation like Hointer to combine clicks and bricks for this generation.
After attending the Millennial Mega Mashup last year, I’m not the least bit surprised Millennials are not avid online shoppers. All the research presented at the mashup showed that Millennials prefer to shop at brick and mortar stores with their friends—the more the better.
They are kids and they love to socialize! At that age, whatever the generation, you just don’t have that much money and you are frugal about how you spend it. But you want to go out with your friends and enjoy experiences. Kids have always hung out in malls. That should come as no surprise!
With age, time becomes more of a factor. Maintaining a household, children, etc., that will lead them to more online shopping.
The danger in classifying a generation is that it loses the detailed reality of the groups within the generation. There are groups of Millennials who are entirely online shoppers. And they are also extraordinarily tech savvy.
However, there’s also vast numbers who fit this profile (obviously a larger number) and there are many who use tech a lot – but that’s a far cry from “tech savvy”.
What we should all take from this? Don’t make major marketing investments based on broad assumptions about a generation. We all need to do our own work to see how OUR customers work.
To build on Peter’s remarks – if I might: the description corresponds to people who are between 13 and 33. “Heterogeneous” is putting it mildly, as it mixes people who are – literally – children (with no real income) along with 30-something adults forming families (and presumably spending $$$ doing so). So the generalization is far worse, even, than lumping together all “boomers”, who at least are all adults (albeit in different life stages).
It may be because they don’t have credit cards.
Being that I was born in 1984, it appears I would fit into this group. From what I see among people I know of my age group, many of them like to shop and like expensive things, but simply cannot afford them.
The other thing about Millennials is they are not only clueless on price, but do not want to talk about price (doing so, they think, highlights that money is tight, a reality many Millennials do not want to admit or shine light at).
Another tough thing about my age group is you cannot seem to “sell” to most of us in a retail store. Self service is where it’s at with this group because that is what we grew up with and we don’t really know different. Most of the time, Millennials in retail stores are half browsing/buying and half on their phone or with headphones in. Contrast that to Millennials in, say, a restaurant setting, and it seems it is much easier to upsell items to us, make a connection, etc. I think what a lot of retailers need to figure out how to do with Millennials is actually get the millennial engaged and connected so the retailer can communicate their value proposition, try to sell them related items, etc. I do not think mMillennials are terribly loyal to most retailers; some brands, yes, but the retailers, not so much.
Perhaps the biggest issue with Millennials is the GenX group before us that raised some of us overextended itself, bought too much, took out too much debt, and we simply cannot “have” as much material stuff as our parents had. Economic reality.
Millennials want to spend on things which are important to them. For example, they can spend on having the latest smartphone and data plans. However, the income status does not allow them to have everything premium, so they have to cut down somewhere and daily living is where they do it.