All grown up, ready to tackle the world and 80 million strong, this generation of digital natives is revolutionizing America’s retail landscape.
How can you adapt your sales strategies to fit generation Y’s values and lifestyles?
BY JULIE A. PALM
With their financial futures thrown off course by the Great Recession and their lives shaped by ever-present digital technologies, consumers in the millennial generation are like no others.
To successfully sell sleep products to them, you need to understand how millennials live and how they shop. But first you need to know just how significant millennials will be to your future business.
The parameters can shift by a few years in either direction, but demographers typically define millennials as those born from 1980 to 2000, making them 16 to 36 years old. Those are ages when people begin to establish independent lives, earn higher education, launch careers, buy houses, get married and start families—and those are the life events that trigger mattress purchases. There are roughly 80 million millennials in the United States—making them the largest demographic cohort, even bigger than the baby boomers. And we know how much that demographic juggernaut shaped everything from culture to politics to the economy. Millennials are poised to leave a big mark on all aspects of American life, including retail.
Accenture, a global consulting and professional services company, estimates that millennials currently spend about $600 billion a year. “While millennials are already a potent force, they will truly come into their own by 2020, when we project their spending in the United States will grow to $1.4 trillion annually and represent 30% of total retail sales,” write Christopher Donnelly and Renato Scaff in a 2013 Accenture report, “Who Are the Millennial Shoppers? And What Do They Really Want?”
Ubiquitous and rapidly changing technology, which gives millennials unprecedented, virtually limitless access to information about retailers, brands, products and pricing.
As global investment firm Goldman Sachs notes in its 2015 report, “Millennials: Coming of Age,” this is “the first generation of digital natives, and their affinity for technology helps shape how they shop. They are used to instant access to price comparisons, product information and peer reviews.” Survey results released in 2015 by the millennial-focused website Elite Daily and Boston-based research and management consulting firm Millennial Branding show that a striking 87% of millennials use either two or three tech devices at least once a day. With access to smartphones, laptops, tablets and, increasingly, wearable tech, millennials are always connected.
The Great Recession, which has altered not only millennials’ spending habits and attitudes about money but also their overall lifestyles.
Often carrying student loan debt and not eager to take on more obligations, millennials have helped usher in the “sharing economy,” which allows them, for example, to forego purchasing a vehicle by instead using auto-sharing services such as Zipcar and transportation networks such as Uber. They’re also more likely to be living at home—frequently a direct result of the recession, which made it difficult for many to find good-paying jobs after high school or college graduation. In 2010, 30% of adults ages 18 to 34 were living with their parents, according to the Goldman Sachs report. In part because of economics and in part because of long-term societal trends, millennials also are marrying later. But, as the economy continues to improve and the generation ages, demographers and marketers expect some of these trends to reverse.
“As millennials enter their peak home-buying years (25 to 45), their reluctance to enter the housing market could change. The cohort’s sheer size, plus its desire to settle down in the future, could lead to a surge in home sales,” the Goldman Sachs report says. Similarly, Goldman Sachs analysts note, “Millennials have been putting off significant milestones like marriage and children. But that doesn’t mean they want to stay single forever.”
Let’s look specifically at how millennial consumers are different from other generations—and what this means for mattress retailers.
Information overload—in overdrive
Think about it: For decades, retailers had three primary ways to reach consumers—print (mainly newspapers and magazines), radio and television. In the 1990s, the Internet offered some new options. Of course, all these formats still exist, but they are changing at an unparalleled pace. Local radio stations are being supplanted by music streaming services. The newest generation of consumers reads online, not on paper. Sure, millennials still watch TV programs, but thanks to services like Netflix, Amazon and Hulu, they do it on their own schedule—and more likely on a smartphone or tablet than a traditional TV. When they want to know what’s going on in the world, they turn to Twitter or Facebook, not the 6 o’clock news.
The Elite Daily/Millennial Branding survey found that only 3% of millennials rank TV news or magazines as influencing their purchasing decisions. In contrast, 33% call blogs their “top media source.”
The Accenture report frames the situation this way: “It took radio more than 30 years to achieve a consumer adoption rate of 50%. Mobile phones took only 15 years to reach the same level, and social media, a mere 3.5 years. The message for retailers is simple: While you had literally decades to perfect your radio-era go-to-market strategy, with social media you will be lucky to get a year, and in the future, a year might be a best-case scenario.”
To reach millennials, you are going to need to be open to change and ready to embrace the latest technologies, apps and media platforms—whatever the next big thing may be.
Although millennials go online to research products, read reviews, compare prices and, ultimately, purchase products, they don’t shop exclusively online. This generation is a driving force behind the concept of omni-channel retailing, in which consumers can buy online, in-store or in combination, for instance, ordering new pillows from your e-commerce site and then picking them up at your store or rest-testing a bed at your location but going online later to actually place the order. If you’re a retailer still reluctant to create an e-commerce site, you may have to rethink that to meet the needs of millennial customers.
“When it comes to shopping, we found that 68% of all millennials demand an integrated, seamless experience regardless of the channel. That means being able to transition effortlessly from smartphone to personal computer to physical store in their quest for the best products,” the Accenture report says. (For more on creating a seamless experience, see story on page 26.)
As the Goldman Sachs analysts put it: “Millennials’ affinity for technology is reshaping the retail space. With product information, reviews and price comparisons at their fingertips, millennials are turning to brands that can offer maximum convenience at the lowest cost.”
Regardless of where or how they shop, millennials want to feel valued. As one millennial put it to the Accenture researchers: “There is (something) about the product and its cost, but there’s also a big part about being treated like a valued customer.” As another said, “You want to feel welcome when you go to the stores.”
Also of note to mattress retailers, millennials see value in both shopping local and buying American-made products. According to a 2015 report from the Nielsen Co., a New York-based consumer research firm, about 40% of millennials prefer to shop locally, “even if it costs more” and 73% say “buying American products is important to them.”
When one of the defining events of your life is a devastating economic downturn, it’s going to affect your attitudes about money and spending habits. And that’s certainly the case with millennials, who continue to feel an economic pinch. In a November 2014 article for Huffington Post titled “7 Money Myths About Millennials,” contributor Valencia Higuera explains that this generation is deeply worried about finances. “A 2013 Wells Fargo survey found that more than half of millennials (about 54%) say debt is their ‘biggest financial concern.’ And according to a recent Fidelity study, 39% of millennials worry about their financial future ‘at least once a week,’ ” Higuera writes.
Here’s part of the reason: According to Nielsen, millennials are twice as likely as the average consumer to have student loan debt and more than one-quarter of millennials say they don’t have any extra money left after pay day.
“With limited money to spend, millennials are savvy shoppers by necessity,” according to a later 2015 Nielsen report, “Millennials at the Mall: What Factors Drive Young Consumers’ Retail Decisions?” In fact, Nielsen says, 42% of millennials check “at least four sources when trying to decide on a purchase” and “a third make purchases only when they have a coupon or promotional code.”
Indeed, this is a deal-conscious generation. “The top 20 apps used by millennials are either retail or discount focused, with Amazon Mobile and Groupon topping the charts,” Higuera writes in the Huffington Post article. Nielsen says “deals account for 31% of (millennials’) shopping dollars,” while Goldman Sachs’ research shows that 57% of millennials compare prices while in a store, a concept known as “showrooming.”
“One challenge for retailers is the millennials’ seemingly omniscient grasp of prices and promotions, which this generation expects to be the same in stores as they are online. To cash in on in-store retailer promotions, millennials also want mobile coupon scanning capabilities, and having to print out coupons prior to shopping could be a deal-breaker. One summed it up this way: ‘When I get to the store, if I haven’t printed out my coupon and I can’t use it, I walk out,’ ” according to the Accenture report.
Takeaways: Millennials aren’t eager to part with their money. When selling to them, emphasize the value of a new bed set and how its features can improve sleep, health and wellness. Be open about pricing, both online and in-store—millennials demand it.
Brand loyal but hard to get
“The notion that millennials love brands but hate advertising is oversimplifying a bit, but there’s truth in it: They tend to be loyal customers of the brands they like,” writes Penry Price, vice president of global sales marketing solutions for the social media site LinkedIn, in a July 2015 article posted on the technology and analysis website Re/code.
In the Elite Daily/Millennial Branding survey, 60% of respondents said they are “often” or “always” loyal to the brands they purchase. What helps to build loyalty among millennials? A quality product and a good customer service experience go a long way, the survey found. Millennials also appreciate a company that “gives back to society instead of just making a profit.”
In general, millennials are wary of company claims, including ads and marketing messages. They are more likely to turn to friends, (37%), parents (36%) and online experts (17%) for advice and recommendations before making a purchase, the Elite Daily/Millennial branding survey found. That said, millennials still expect companies to put information about themselves and their products online, although, not unexpectedly given the generation’s skepticism, millennials rank the “authenticity” of that information more important (43%) than the content itself (32%).
“If you want to connect with millennials, then you’re going to have to rethink the way you advertise and market your product to them. Instead of traditional advertising, which they ignore, brands have to publish authentic content as a way of building trust and loyalty,” says Dan Schawbel, founder of Millennial Branding and author of the book “Promote Yourself.”
Millennials enjoy being wooed by retailers and brands. In fact, according to the Accenture report, a whopping 95% of millennials “want their brands to court them actively.” More than 60% of millennials say they are more likely to become a loyal customer of companies that engage them through social networks, according to the Elite Daily/Millennial Branding survey. When it comes to which social networks they rely on, 43% say Facebook most influences their spending habits, followed by Instagram (22%) and Pinterest (12%).
Although they interact with retailers and brands through social media, millennials don’t see companies as “friends.” “Instead, they view social media relationships with brands and retailers as transactional,” according to the Accenture report. Millennials told researchers they follow or like companies, in large part, for better access to deals, promotions or additional product information.
In fact, the Accenture report found one of the best ways to engage millennials is to send coupons—either electronically or even through traditional mail to their homes. Text messages from companies—say, promoting a sale or trumpeting a new product line—also can influence millennial shopping behavior. These consumers have grown up with loyalty and rewards programs and seek “personalized, targeted promotions and discounts as the price for their loyalty” to the company, according to Accenture. As one millennial told researchers: “Loyalty programs are big.”
Loyalty programs can be a tricky thing for mattress retailers, especially sleep shops, to create, but may work for some, especially those who sell other home furnishings or sleep accessories. But every retailer can find ways to offer the types of promotions, deals and “just for you” perks that are attractive to millennials. Charity drives and special events also can help draw them into your store. Consider hosting a seminar with a sleep expert or how-to workshop with an interior designer who specializes in creating serene bedrooms.
Changing your ways
We acknowledge this is a lot to digest. A good starting place would be to find two or three ways that you might better reach millennial consumers and work to implement those strategies in the first six months of 2016. Then, look at making other changes later on. The key is to not keep operating the way you always have: This next generation isn’t interested in shopping for or purchasing products the way their parents did, but they quickly will be the dominate consumer group keeping your store or e-commerce site in business.
As the Accenture report concludes: “Driven by the millennials and future digital generations as yet unnamed, we believe retailing will change more in the next five years than it has in the last 50.”
Breaking down the demographic: Millennials fall into four groups
Do all millennials treat their smartphones like another appendage? Do they all spend hours a day interacting via social media? Of course not. When we’re talking about a group of 80 million people, we can make some generalizations about attitudes and behaviors, but there are wide variations between individuals.
In a 2015 report titled “The Millennial Disconnect,” global media network Carat argues that marketers will risk missing or even alienating key groups of millennials if they treat them all the same. Carat surveyed 14,000 millennials in the United States and discovered that the stereotype of the media-obsessed, technology-dependent millennial represents only about 42% of the generation, meaning that the large remainder can be defined by somewhat different attributes and attitudes. Carat breaks that other 58% into three other groups.
“For these remaining millennials, the picture is complex, and we as marketers will need to work to connect with them,” says Doug Ray, U.S. chief executive officer and global president at Carat.
Here are the millennial subsets as defined by Carat:
42% of millennials
“This is stereotypical millennial group that we all know,” Ray says. “They’re attuned to trends in fashion and culture, highly social and digitally connected. Because their media habits are so easy to perceive and track, with endless amounts of social sharing and engagement, it’s not hard to see how this group became the stand-in for the identity of their entire generation.”
23% of millennials
This group is “the polar opposite” of the better known Trend-Netters, Ray says. Alter-Natives are found among the youngest millennials and are more likely to live with their parents. While even more inclined to spend time online than other millennials, “they tend to be introverted, hold nonconformist views and highly value their privacy,” Ray says. “The challenge here is complexity. They are difficult to understand because they are private, and their habits are more under the radar.”
19% of millennials
When it comes to attitudes, millennials in this group more closely resemble their predecessors in generation X and even baby boomers. They seek work-life balance and embrace more traditional values, according to Carat’s findings. “Interestingly, while they are plugged-in digitally, they have a need to step away from technology and connect face to face in the real world,” Ray says. “The challenge here is understanding their boundaries and respecting those.”
16% of millennials
Ray calls these “the real millennial trendsetters.” “This worldly and highly connected group values better things over more things and gravitates toward authenticity and products with a backstory. … The challenge here is sincerity in media and communications,” Ray cautions marketers. “When speaking to them, we need to be as genuine as possible.”
How retailers can become ‘seamless’
When it comes to shopping, millennials don’t draw sharp distinctions between online and in-store. For them, the buying process is a more fluid one. It likely involves doing research, reading reviews and asking advice online. They might make their purchase using an e-commerce site or they might head over to a brick-and-mortar store to see, touch or try on an item—and, most likely, use a smartphone to compare prices before making the final purchase.
The shopping habits of millennials are helping to drive omni-channel retailing, which blurs the lines between e-commerce and traditional retailing. But omni-channel retailing works best when it appears to consumers to be “seamless.”
“We define seamlessness as the ability to deliver a consistently personalized, on-brand experience for each individual customer, at every touchpoint—anytime and anywhere,” write Christopher Donnelly and Renato Scaff in a 2013 report from Accenture, a global consulting and professional services company.
The report, “Who Are the Millennial Shoppers? And What Do They Really Want?” lays out four components Accenture believes are necessary for a seamless retail experience.
- No. 1: “Retailers need to customize their offerings across channels in the ways millennials want, which typically boils down to providing better, faster, more memorable service,” Donnelly and Scaff write.
- No. 2: Retailers need to carry on “a single conversation with customers,” meaning that interactions with consumers are consistent wherever they occur—from tablets and smartphones to customer service lines to the physical store. Creating this may require significant operational changes.
- No. 3: “IT platforms should be integrated to unify their sources of data and boost cross-channel transparency,” Donnelly and Scaff say.
- No. 4: Realize you may not be able to do it all. “Retailers will need to team up with technology, data, analytics and process partners to provide the service performance millennials want, since they will not be able to deliver it all themselves,” the report cautions. “For instance, a third-party logistics provider can supply same-day delivery services for online purchases, enabling retailers to offer a service customers want without having to invest in an expanded delivery fleet or new routing capabilities.”
When is a millennial not a millennial
Although demographers and marketers seem comfortable with the term millennials, many of the people it applies to don’t embrace the label.
According to a 2015 survey from the Washington, D.C.-based Pew Research Center, only 40% of adults ages 18 to 34 consider themselves to be part of the millennial generation and as many as a third (33%) actually consider themselves part of the preceding cohort, generation X. (Pew, it should be noted, defines millennials as being born from 1981 to 1997—different parameters than some other demographers use.)
To be fair, significant portions of every generation—all the way back to the silent generation—don’t feel the prevalent demographic label applies to them, according to Pew. The one exception: 79% of boomers consider themselves as part of that group.
Who will be next?
If it’s not enough of a challenge to figure out how to advertise and sell to millennials, demographers and marketers already are defining what will be the next group of consumers—and, of course, coming up with a clever name.
In late 2015, the cable and satellite network MTV deemed the youngest generation “the founders,” based on a survey of 1,000 youths born after December 2000, who were asked what their cohort should be called. Other suggestions among the 455 offered included the builders, the bridge generation, the navigators and the regenerators.
The founders label acknowledges that our current society is going to need some rebuilding. “They have this self-awareness that systems have been broken,” MTV President Sean Atkins told Time magazine. “But they can’t be the generation that says we’ll break it even more.”
We’ll have to wait to see what name sticks. Remember that for a time, the millennials were more generally known as generation Y, a term still in use but far less prevalently than the m-word.
Julie A. Palm is chief wordsmith at Palm Ink LLC in Winston-Salem, North Carolina. She has 25 years of experience as a writer and editor for newspapers and magazines and as a publications director. She is a past editor in chief of both Sleep Savvy and BedTimes magazines. She can be reached at email@example.com.