Contrary to popular belief, internet retailers are not the sole drivers behind the closures of some of the most iconic retail brands of the last 50 years. Brand names such as Sears, K-Mart, JCPenney, Macy’s and Sport Chalet are shuttering their doors because they are struggling to transition from how the Baby Boomers shopped to how the Millennials seek to experience shopping.
Plain and simple – I’m tired of hearing how this is the end of retail. I don’t believe that power centers will become distribution hubs and that “bricks and mortar” retail will continue to die a slow death. Instead, what I see is a paradigm shift from the way we looked at the lost art of retail to how the next generation is transforming the way we experience shopping altogether. In order to understand how shopping centers are retailing we should look at how the Baby Boomer generation once influenced retail and how the Millennials will now transform the retail industry.
8,000 new shopping centers were built throughout the 1960’s and 1970’s in response to the tremendous demand from the Baby Boomer generation (born in between 1946 to 1964). It is no coincidence that K-mart, Walmart, Kohl’s, Rite-Aid and Target were all born in 1962, followed closely by Best Buy, Crate & Barrel, Gap, Petco and Pier 1 Imports. The Baby Boomer consumers were largely white, middle class children from a two-parent single income home and, broadly speaking, liked the same stuff. This made it extremely easy for retailers to cater, predict and deliver on consumer demands.
In fact, the demand was so great that creativity gave way to production to satisfy the consumer and nobody complained. As the Boomer joined the workforce and started to have families in the suburbs, developers and retailers responded by building large format or “power center” shopping centers. These power centers attracted “Category Killer” tenants such as Walmart, and Home Depot, that could deliver products cheaper and at a massive scale. This tremendously affected the traditional mom & pop retailer that could no longer compete with prices. In Doug Stephens’, book The Retail Revival; he calls this period the Industrial Devolution; a period where retailing ceased to be a craft and became an occupation. The new era would bear witness to the displacement of personal service, unique products and artful merchandise by stack-outs, blowouts and rollbacks. Quality would take a back seat to availability, and abundance would triumph over substance.”
Between the years of 1980 to 2005, when the Baby Boomers were at their earning prime, the US economy grew 100%. This growth concluded with the great recession of 2008.
Now, almost 10 years after the great recession and 55 years after the last Boomers were born, most Baby Boomers are past their earning primes but are still holding on to executive level positions while shifting their disposable income from retail consumption to travel and health care. Retailers are still slowly recovering from the recession but must now adapt to new consumer demands generated from the largest generation since the Baby Boomer: the complex and diverse Millennials (born between 1981-1997).
Millennial consumer demands are a 180-degree turn from the Baby Boomers. Unlike the vanilla Boomer, Millennials come from various cultures, ethnicities, educations and socio-economic status. This dramatic shift in consumer tastes is proving problematic to the various retailers that have not adapted to the new wave of demand led by the Millennial consumer.
Why should every person involved in the shopping industry care about Millennials?
Because they are the largest generation in U.S. History and have a higher net worth than any previous generation according to a Forbes Magazine article written by the CEO of ICSC (International Shopping Center Council), Tom McGee. Forbes Magazine states that 14% of them already have a net worth above $2,000,000 and they have not yet reached their prime working and spending years. They are spending more money on entertainment and dining than any other generation. And as a whole will allocate a lot more of their disposable income towards “experiences.”
“It’s not that we are lazy,” states Marisa, our 22-year-old marketing intern, “we just take pride in figuring out how to make things work for us quickly. It’s called “Life-Hacking”. Marisa is the ideal millennial to provide me with insights into their purchasing rituals. She just completed all the courses for her bachelor’s degree at the University of Southern California but instead of heading into the workforce, she is opting to stay an extra year at USC to complete her Master’s Degree.
Here is what I learned from Marisa, and what retailers will need to learn in order to prosper.
Most of her time is spent online and it bleeds into her shopping habits because she follows bloggers who demonstrate or try-on purchases in picture or video format. If she decides it looks good on them and she wants to try it on, she buys it. The bloggers will link where to buy the product, making it convenient for her to click on the link and make the purchase.
For a long time the biggest fad was trying to discover the next fad; however, she has recently noticed a decline in materialism and a large emphasis on ethical buying. Her peers are more engaged in politics and cultural issues, which means that they are less likely to buy something from stores whose values are not aligned with theirs.
With limited disposable income, she will choose to spend $20 towards trying a new restaurant over buying a new top. She will pick the restaurant for the following reasons: a) she can post about it on social media, b) she can discuss her experience with her friends and c) it allows her to have social interaction. Since she spends most of her time on online, she cherishes the opportunity to spend time socially with friends. She will admit that the majority of her disposable income is spent on eating, drinking, Ubers and gasoline.
When it comes to actually going shopping, she only goes if they accept credit cards over cash- since it is very rare she has cash. She will rarely visit a shopping center but when she goes, it is because of one of three things; a) it is for a very specific item, b) there is a coupon involved or c) the EXPERIENCE. She enjoys going to Target because it is therapeutic. She will venture into stores to try clothes or make-up if time allows for it but will rarely purchase an item.
For more detailed information on the shopping habits of Millennials click here.
The difference in retail habits between Baby Boomers and Millennials provides a perfect case study for the premise that retailing is not dying a slow death, it is simply evolving to meet the needs of the new generation. Those retailers that understand and capture this new customer will thrive.
The Baby Boomers led the way in consumerism and retailers responded with big boxes, mass quantities and “low” prices. Millennials are bringing back the lost art of retail, by demanding an experience, convenience, quality and purpose. We will see over the next few years which retailers will meet these demands and which ones will fail to catch up with today’s main consumer.