4 Things Retailers Need to Know About Millennials

From the impact they are having on politics to their effect on the ways we communicate to how they are influencing every category of consumption to their spending and savings habits - Millennials are a force to be reckoned with. They are social. They want to be engaged. They seek authenticity and sophistication. Experiences that deliver will earn their loyalty.

The Economist Intelligence Unit conducted a study of Millennials last year and found that business executives believe them to care little about price, and most about convenience, style, taste, and peer recommendations. Are they right? Even when it comes to wine, recent research by Mintel/Simmons and the Wine Council shows that Millennials are different.

Here are key takeaways on what retailers need to know about millennials:

• They want to be in the know: Millennials who drink wine are twice as likely to belong to a wine club (20%) and to drink at wine bars in the past three months (38%) than older groups, (Wine Council).
  
  
• They want sophistication: Forty-one percent of Millennials who drink wine say they drink imported wine most often vs. only 24% of Boomers and 31% of Gen X'ers. For example 31% of Millennials have drunk a wine from NZ, compared to only 15% of Gen X'ers (Wine Council). And 40% percent of 25-34 year olds agree that more expensive wine tastes better compared to 31% of adults on average. (Mintel)
  
  
• They are willing to spend more to make an impression: Millennials say they spend about $10 more per bottle than average across a wide variety of wine buying occasions. For example, Millennials say they would spend $40 on a bottle of wine for a special occasion compared to just $24 for all adults. (Mintel)
  
  
• They value authentic experiences when they shop: Millennials are much more likely to purchase wine at a winery (33%), specialty liquor store (40%) or gourmet food store (20%). (Mintel)
  

Wine is a favorite discussion topic on Yelp, a vibrant millennial community. A quick review of the listings for San Francisco reveals a beehive of millennial (and other) enthusiasts advising one another on the pros and cons of different wineries, wine stores, wine clubs, and restaurant wine lists. Here's an entry by sascha "just let me" b. from March 20, 2009:

Berna, I do one of the K&L clubs (champagne) as well as the monthly club with Plumpjack. I enjoy them both for the fun of having new and interesting wines selected for me that I wouldn't necessarily seek out (or find) on my own. I think that K&L has some good buyers --- which is the key to a good club --- and PJs has a great buyer as well. Do I always like every wine? No. Am I always satisfied? Pretty much. The value is there, and if you can budget the guaranteed $40-$50 a month, it's a lot of fun, and will expand your wine horizons no matter what club you go with.

I also do some winery clubs, but that is a different value proposition: you're only getting one winery's output, and you better make fer dam sure that you know and like the winemaker's style and vision.

The headline for retailers trying to engage Millennials – make it real and create opportunities for Millennials to study up on your category, and to share their knowledge. Help them show they're in the know!

For food and drink marketers wanting a more intimate understanding of millennials, check out Brand Amplitude's upcoming proprietary study of millennial trendsetters, food and wine.

Millennials & Loyalty – Oxymoron or No Brainer?

They’re between 13 and 30, spend over $20 billion a year and influence another $120+ billion in purchases. We live and work with them…we practically (and actually) raised them! But what makes Millennials tick? And more importantly, how do brands earn their loyalty?

On one hand, lots has been written about Millennials taking the word “fickle” to a whole new level. According to Iconoculture as reported by CNET, "You've got a generation of kids who've had an unprecedented amount of control of their media and they're not going to give it up. It does put out a challenge--for anyone in the media business--of how to keep attention in that media."

Bill Hanifin's latest research shows that "over 62% of global teens are apathetic to traditional advertising messages and 42% make purchase decisions based on the recommendations of their friends." As result, he concludes that "traditional methods to engage and retain best customers may not work with Generation Y" (aka millennials).

They snub well-known specialty retailers like Abercrombie for even more unique stores like Buckle. But trends change and (particularly young) Millennials look more narrowly for stores that resonate with them.

As a Business Week story on younger millennials points out, the challenge lies in striking the right balance in luring teenagers with cool and unique offerings but avoiding the slip toward ubiquitousness. "One of the interesting paradoxes of being a teenager is trying to be unique but not wanting to be singled out in a peer group." May be generalizable to all millennials.

At the same time, some have gained traction with millennials. Take ABC Family’s shift toward “hard-to-reach iPod-listening, Facebook-using, YouTube-viewing women, mostly ages 14 to 28.” As the network’s President, Paul Lee, told Variety "We ended up building a brand that's really resonating with that audience...The millennials consume obscene amounts of media, and the truth is this is a generation that wants to lie back and have great stories told to it."

Though they may be fickle consumers with short attention spans, ink has also been spent commending Millennials for being civic-minded doers. According to an April 14 story on AARP’s website (how ironic!) referring to Millennial Makeover co-authored by Morley Winograd and Michael Hais:

“Young adults who grew up in the shadow of the 9/11 attacks and saw the wreckage of Hurricane Katrina are volunteering at home and abroad in record numbers. The generation that learned in school to serve as well as to read and write, the Millennials were the first global Internet explorers even as they pioneered social networking for favorite causes at home. This civic generation has a willingness to put aside some of their own personal advancement to improve society."

So, which is it - fickle consumers? Loyal supporters of one or more causes? I think Millennials are both.

Will embracing social issues like Fair Trade (Starbucks) or shoes for impoverished kids (TOMS Shoes and Timberland) make millennials feel connected to the sponsoring brand, and turn them into loyal customers (and employees)? What about introducing new gizmos and applications to help millennials plan and save money? (Kraft's sponsorship of a new iPhone app that allows people to search for recipes and manage their shopping lists)?

What is the best way to build a loyal following of Millennials? What do you think?

Recession Redirects Retail Innovation

The economy has been tough for lots of retailers. Personal bankruptcies are running high, and consumers have been reluctant to open their wallets regardless of the great deals being offered to tempt them.

Teens and young adults have been two of the few bright spots that have gotten a lot of press, and so have retailers that cater to them. While the rest of us have been preoccupied with what happens to the Dow on a daily (or more frequent?) basis, millennials had no stock portfolios to speak of, so the market turmoil has not affected their sense of financial security.

However, it looks like the Millennial retailing innovation engine may be losing some of its steam. According to a March 13 story in the WSJ, several retailers have decided recently to drop their millennial-focused new concepts. Pacific Sunwear, Quiksilver, American Eagle and Aeropostale all announced plans to take charges to earnings and close chains aimed at this demographic.

A closer look at these concepts suggests these closures may actually be a rejection of the strategy of slicing the Millennial market into ever finer niches. The Long Tail got a lot of press when it came out in 2006, and led retailers and others to attempt to sell less of more to increasing numbers of niche markets. Seems Millennials don't respond well to slicing and dicing.

Hot Topic and The Buckle are examples of Millennial-focused retailers that are thriving. Unlike the retailers mentioned above, these two have not been chasing new niches. Instead, they have stayed the course and continue to aim at a broad segment of the teen and twenty-something markets.

Winning retailers know innovation is key to continued relevance. Rather than go for line or concept extensions, they’re focusing on merchandise innovation within their existing footprint and formula. Forbes reported last week on an RBC Capital Markets analyst’s comments that "As we walk the malls and listen to companies report sales and earnings, it's clear that where there is exciting merchandise, there is outperformance on a relative basis."

In addition to merchandise innovation, the other area of innovation that is driving retail success with Millennials these days is the in-store customer experience. S&P reported recently that “an engaged sales force and layaway program that allows youths to buy designer denim” are a big part of Buckle’s success.

So, it’s back to basics when it comes to retail innovation. More than ever, with prices down everywhere, it’s about the product and the customer experience. Retailers whose merchants have budgets to experiment with new products and sources and who have the ability to hire and upskill their sales associates will win.

We Are Where We Prefer to Eat

McDonald’s was an important part of our lives when our kids were young. We have the entire Disney collection of toys served with Happy Meals – in fact, the toy was the whole reason my kids ate lunch some days.

But it’s been years since we’ve gone to McDonald’s. Whether we’re on a roadtrip or closer to home, we shifted our allegiance years ago. I do see (and use) Starbucks as the Third Place, after home and work. So, a recent PEW Research Center report on their Social & Demographic Trends survey results caught my eye. They asked people whether they would prefer to live in a place with more Starbucks or more McDonald’s. While some of the differences are intuitive, some surprised me.

For example, I pretty much knew or suspected that the preference for McDonald’s goes up as income and level of education go down. And I was not surprised to see that Starbucks lovers are more likely to live in the West and to say they’re liberal.

What I did find surprising was that:

• In total, people would strongly prefer to have more McDonald’s around them than Starbucks
• Blacks and Whites have a clear preference for McDonald’s while Hispanics are nearly evenly split between the two brands
• 18-29 year olds strongly prefer Starbucks while all other age groups prefer McDonald’s
• Men strongly prefer McDonald’s and women are split evenly between the two

Besides suggesting that I have an outdated image of the McDonald’s customer, what else do PEW’s findings mean? Here are a few specific thoughts:

1. Hispanics: Starbucks has an opportunity to capitalize on its apparent strength with Hispanics. Are they doing anything about that? McDonald’s is surely trying to win them over.
2. Millennials: Taco Bell and Burger King may resonate more with millennials than McDonald’s. As a result, McDonalds’ weakness with 18-29 year olds may be because this group voted against them rather than actually voting for Starbucks.
3. Men: Starbucks has some shoring up to do with men. Do they know what men find lacking in the Starbucks experience? Does McDonald’s know why men prefer them to Starbucks by a 16-point margin?

More generally, it’s possible these results say more about which company’s stores people think would make a good neighbor than about where people would rather eat. While being a good neighbor doesn’t immediately generate revenue, it does build good will. And that can translate into revenue or a higher stock price over time.

Viewed in this way, the results say there is greater regard for what McDonald’s contributes to the communities it serves. Mickey D’s has been around longer, is known for its employee training, spreads the wealth through franchising opportunities, and has been more visible in the community through, for example, Ronald McDonald House. Taken together, these factors may explain why overall people would rather have more Golden Arches than Third Places in the neighborhood.