NEW YORK— While Baby Boomers still wield a significant amount of spending power, the Millennial generation is now 86 million strong and driving the greatest spending growth, according to the AIMsights Group.
In addition, the U.S. Census Bureau reported that U.S. Millennials now outnumber Baby Boomers by nearly 10%, surpassing them as the nation’s largest living generation.
“The home industry will grow because of the demographic changes about to hit us. The question is really more on how high, and that will be defined by how in-tune we are with Millennials and how effective our product development, marketing and merchandising will be executed to meet their needs,” said Joe Derochowski, NPD’s home industry analyst.
Economic hardships and advancing technologies have, however, significantly re-shaped the behavior and spending habits of this demographic compared to those before them.
The Millennial focus on smaller space living, for example, has forced the housewares industry to rethink product development and marketing strategies in order to tap into the spending power of this growing demographic.
“Millennials are all about authenticity, and so it makes total sense that this small space movement would take place under their watch,” said Bryna Kuhnreich, senior director, marketing management, Sensio Inc.
She added, “Our research tells us that marriages are in a decline especially with Millennials, so this group will either live the single life or find roommates. This will most likely keep them in smaller living arrangements where upgrading to bigger homes may probably take longer.”
The Great Recession also played a major role in today’s Millennial consumer habits, and “still lingers in the Millennial mindset,” according to Marsha Everton, principal, AIMsights Group.
“It affected their parents in a very serious way, and the behavior of many banks and bankers became clear. So there’s a fundamental distrust of banking institutions,” Everton said, adding that a recent study showed four of the leading banks are among the 10 least loved brands by Millennials.
For Millennials today, this distrust has translated into financial savvy and conservatism. “Millennials step back and are very cautious where they put their money and how they invest. They just think that someone is trying to pull one over on them,” Everton said. “And of course Millennials are much more comfortable with technology, so they are more comfortable with some of these electronic payment systems that are beyond the traditional banking structure.”
Small space living has become a go-to strategy for the financially skeptical and conservative Millennial looking to rely less on banks and borrowed money.
Aligned with financial conservatism, the Millennial concept of value has moved well beyond price. This demographic, more so than generations past, focus on function and how housewares fits in their life, analysts noted.
In addition, Everton said Millennials in smaller spaces are looking to live decluttered lifestyles. “With that mindset, the pieces have to be even more intentional. They want to know ‘Does this do enough for me that I should give up some of the precious space in my apartment?’ They want to know exactly what it’s going to do for them, and they’re willing to define themselves by having a few good things, rather than a lot of stuff,” she said.
NPD’s Derochowski noted that the housewares industry should be increasing its efforts in innovation due to the demographic changes occurring, “but instead, we are reducing our innovation efforts. This is a time to step on the gas for the home industry, not put on the breaks or cruise control,” he said.
In terms of product development, this means manufacturers will need to focus on smaller footprints and multi-functionality to prove value and lure this growing demographic.
Kuhnreich said, “Millennials prefer that one unit that can be their multi-purpose go-to item for most of
their cooking needs. This will save them money by buying less small kitchen appliances and this will save them precious space in their crowded kitchens.”
She added that the company is actively trying to reduce the footprint of established appliances, but, more importantly, is being very selective with its new product launches. “We are looking
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for multi-purpose units that are versatile and can perform many different types of cooking techniques, such as our Bella pressure cooker, air fryer and our 8-in-1 grill station. Just one of these units can replace two or three other kitchen appliances and thus reduce the space required and clutter,” she said.
Shae Hong, CEO and president of Sensio Inc., added, “It’s amazing that one of the products we are seeing the most success with is the immersion hand blender. It’s interesting because if you look at the Baby Boomers, they didn’t mind having a blender, food process, stand mixer and hand mixer separately. They had the space. But, when you look at the Millennials, they’re finding different ways to use just one.”
When it comes to marketing, Derochowski noted, “It is a challenge to manage the large Boomer population and not turn them off, yet still connect to the large Millennial population. It is a difficult task, but this is where marketers need to continue to test new, creative ways and adjust quickly, trying to hit the magic formula.”
Kuhnreich noted that more brands are appearing on social media and addressing the Millennials “directly where they live and breathe.”
“This is just the beginning,” she said, “and the brands who will be able to keep their messages authentic and transparent will excel in winning the attention of this massive buying group.”
In order to address Millennial digital research habits, Hong noted, “We find that we really need to explain things and provide a ton of content. We’re pooling all of our resources into better descriptions, better call-outs, images and comparison charts and more conversation around multi-functionality. We’ve learned to better explain our product.”
Marketing to Millennials also means manufacturers have to stop relying on brand recognition alone to sell products. Everton noted that there is a growing awareness of Millennial trends aimed at individuality.
“They still value brands, and I think there is a lot of misunderstanding about Millennials and brand loyalty, but they don’t need to define who they are through someone else’s brand. You have to give them a reason to be loyal,” said Everton.
Hong added that for Millennials it’s more about what you can create from your product than what the products are. “We are well positioned from a price standpoint, but the more expensive brands are not going to win that game just by saying, ‘Hey I’m an iconic brand so therefore you should spend more on my product,’” he said.
Vendors also noted that retail has yet to give Millennials the respect they deserve, and will need to better support this growing demographic in order for sales to flourish.
“There’s a lot of talk of the Millennials at retail, but not a lot of strategic efforts being made at the store level towards them,” said Hong. “Brick-and-mortar retail might not get a chance to react because of how fast e-commerce is driving Millennial purchases.”
Maris Cohen, content marketing manager, the NPD Group, added that the Millennials, also known as Generation Y, is estimated to reach $1.4 trillion in annual spending by 2020; roughly one-third of all retail spending.
“Retailers and manufacturers need Generation Y’s share of wallet to increase their market share. This dependence will only intensify as Boomers continue to age and the Millennials gain purchasing power,” said Cohen.