Retailers have a lot to think about these days. Between political risks and inflationary pressure, consumers are more cautious. Retailers have to constantly shift to remain competitive and maintain customer loyalty.
Recent studies in millennial consumer behavior reveal that ‘the convenience factor’ may be more important than price when considering a purchase. Brands who play off this trend, while providing unique products and experiences, could see a positive impact on their bottom line.
Here are five ways to navigate the ever-evolving retail landscape.
1. The Challenge: Not on the High Street
A day out on the high street—which previously benefited major retailers—aren’t the focus of the millennial and Generation Z (post-millennial) consumer. Their consumption is increasingly based on travel, fitness, and dining out, habits encouraged by peer-to-peer-focused companies like Facebook, Snapchat, Instagram, Uber, and Airbnb.
The stock markets are reflecting these priorities, with leisure and travel-related companies—including fitness centers, low-cost airlines, and fast-casual restaurants—generally outperforming apparel and household goods retailers. Department chains also continue to struggle.
And, of course, more and more people are shopping online. Continuous availability and changes such as the rise of Amazon’s drop shipping business model tie directly into the convenience factor.
Lastly, there is the question of millennial frugality. This is likely an effect of the 2008 recession, which, along with increased Internet usage and the emergence of low-cost online retailers like Amazon and eBay, may be contributing to consumer behavioral changes.
How to Win: Embrace Millennial Love of Experiences and Accessibility
Spend your ad dollars where the millennials’ are – search engines and social via mobile. If it makes sense for a given product line, base your launches on the e-commerce subscription model. Focus on wellbeing and leisure-based product lines, and what we predict will be a continued uptick in digital payments. Millennials’ may also be likely to welcome virtual reality shopping experiences but the key winner is adopting a smart multi-screen mobile acquisition strategy.
2. The Challenge: Last Days of the Department Store
Consumers are increasingly shifting purchases away from large retailers in favor of smaller, more convenience-oriented stores. Established brands must follow the exodus.
How to Win: Focus on Consumer Convenience
In line with the consumer preference for convenience, retailers are increasingly moving away from these big-box formats in favor of smaller city-center stores or online shopping. As time-poor millennials’ demonstrate a preference for shopping little and often, these smaller and more accessible formats hold greater appeal by offering extended hours and popular products in convenient locations. The growth of e-commerce is also accelerating this trend, diminishing the need for large locations to accommodate huge inventories, while driving demand for small, local premises that can act as in-store collection points.
3. The Challenge: Inflation
Rising commodity prices will no doubt have a ripple effect on consumer spending and retail bottom lines.
In the US and UK, real wages in 2018 are forecasted to be flat while inflation rises. This will decrease the amount of disposable income as consumers grow more cautious towards their spending. Consequently, this may slow economic growth in both regions.
Consumer confidence in Germany is quite high, as unemployment is at a record low. German buyers are nevertheless guarding their pocketbooks when it comes to medium-to-high ticket purchases, which is more likely to affect advertising spend within automotive and travel.
How to Win: Focus on Consumer Buying Power and Confidence Levels
Buying power and confidence levels are a direct reflection of the economic environment. Some things brands can do to win:
Pay attention to elasticity of demand when launching new products. Offer deals on commodities or product lines where demand is elastic—that is, where demand for products changes more than proportionately to a change in price or income.
Offer amazing deals and discounts around big sale seasons such as Black Friday (UK/US), back-to-school (US), and summer/winter sales (France).
Craft ad creative with messages that convey an understanding of how consumers feel in terms of coping with reduced spending power.
This year’s retail outlook may seem rocky and uncertain. But, hopefully this short analysis provides insight into which consumer and economic trends may be driving millennial retail buying decisions. With a little planning, foresight, and preparation, this may just be your most successful year yet.
Written by Irisini Davis, Marketing Director EMEA at Marin Software.
Marin Software is YMS LDN's official Retail Marketing Partner - make sure you catch them there!