Kasey Lobaugh, Deloitte
It’s a convenient form of demographic shorthand to lump together all Millennials as a single coherent customer segment, but retailers would do better to focus on how much money these shoppers have versus how old they are, according to new research from Deloitte. “Millennials are a generational cohort but they are not a behavioral one,” said Kasey Lobaugh, Principal and Chief Retail Innovation Officer at Deloitte. “People behave more like their income than they do their age.”
Lobaugh led a panel discussion, titled: The Consumer Is Changing, But Perhaps Not How You Think at the 2019 Retail Innovation Conference. He began with a preview of Deloitte research that applied an economic and behavioral lens to Millennials, and to shoppers in general. “The ‘noise’ in the industry is that customers are not spending on products in favor of services and experiences, that they are no longer loyal, and that they are time-starved,” said Lobaugh. While these descriptions may fit high-income Millennials in urban areas, “there are a whole bunch of consumers that are different from the Millennials living in New York City,” he noted.
For example, people may be spending less of their income on products, but it’s likely they are shifting that spend to health care rather than to vacations or trendy restaurants. Health care spending as a percentage of income rose from 5% to 7% between 1997 and 2017. Additionally, people are not abandoning physical stores, but fewer of them are visiting high-end establishments: “Traffic is up in quick service restaurants, convenience stores and traditional grocery stores,” said Lobaugh.
Retailers may not need the high-tech bells and whistles of advanced technology to reach Millennials and Gen Z, Lobaugh noted: “The retailers that have won over the last 20 years know who their customer is and what they value, and they are unapologetic about it,” he said. “Dollar stores and off-price retailers have done really well without pursuing digital strategies to the extent that other retailers have.”
Other panelists noted that, rich or poor, Millennials present challenges to retailers. “Millennials have more purchasing options today,” said Doug Zarkin, VP and CMO, Pearle Vision. “If they want to buy a trendy piece of clothing for a low price, they can get it at H&M. Millennials have access to information and options at their disposal 24/7, so we as retailers need to give them a reason to trust what we make.”
The Amazon Disruption Factor
All the panelists — who also included Virginia Wong, Director of Retail Strategy and Global Trends for L Brands; Brendan Cahill, VP of PRH Labs, Penguin Random House; and Agathe Westad, Head of New Business at Optimove — agreed that Amazon’s ability to disrupt retail continues to be an issue for the industry. “If you’re in a commodity business and you can be replaced by Amazon, you’ve already lost,” said Westad. “Their disruption has profoundly changed the expectations of consumers.”
Wong, who worked for Amazon before coming to L Brands, noted that other brands can successfully partner with the e-Commerce giant, using services such as Amazon Flex or Amazon Locker as tools to solve logistics issues or reach shoppers in new ways.
Cahill noted that as a book publisher, “we have had the ‘gift’ of Amazon for 25 years,” he said. “Amazon didn’t invent disruption, but they have productized it and scaled it in a way that hasn’t happened before in human history, and it’s a challenge for each of our businesses.
“The only way to react to it is to figure out what your core value proposition is, to make yourself distinct in a world that’s going to be redesigned and redefined by processes and partnerships that are much bigger than all of us,” Cahill added. “But if you stay true to that core of what you are, and you understand who your end consumers are and what you are really going to bring to them, you can survive, thrive and even grow.”