There are many myths about the Millennial shopper: They’re fast-fashion obsessed, brand disloyal, label adverse, prefer purchasing online and prioritize discretionary spending on experiences and technology over apparel. And yes, some Millennials fit these stereotypes. But many do not.
Millennials now account for 75 million people—nearly a quarter of the U.S. population—and have recently overtaken Baby Boomers as America’s largest living generation.1 More importantly, they now account for $200 billion in direct buying power annually—their spending is projected to eclipse that of any other generation by 2017—and an additional $500 billion of indirect spending due to their influence on other generations.2
Most retailers and consumer brands have recognized and are embracing these shifting demographics by investing millions of dollars to woo Millennials in an effort to win a share of the $10 trillion that Millennials are expected to spend over their lifetimes.3 But despite these efforts, many of these retailers and consumer brands are not gaining traction with Millennials because they are treating them as one collective population with the same motivations, wants and needs.
In reality, Millennials are not a monolith. Beneath the surface of this huge demographic cohort, there are massively different drivers and behaviors at work. As such, retailers and consumer brands that treat Millennials as a homogeneous group are missing out on the ability to forge more genuine connections with their consumers and drive not only short-term sales, but also lifetime value and long-term loyalty.
Beneath the Surface
Retailers and consumer brands that are serious about winning with Millennials need to get to a level deeper than just age demographics and instead segment consumers based on psychographic attributes that help better explain their specific motivations, interests, attitudes and lifestyle choices.
That’s because consumers who share a psychographic segment are actually more similar in their needs and wants regardless of their age than Millennials—who sit in different psychographic segments—are to each other.
To illustrate this point, Kurt Salmon surveyed 1,455 women ages 18 to 70 to understand variability in women’s apparel shopping behavior, preferences and motivations, as well as what drives these differences. The study clearly identified six distinct psychographic consumer segments that each had its own unique needs and wants when it came to deciding where to shop for apparel. The six segments are:
- Fashion-Focused Shoppers (28% of respondents): Consumers who care deeply about the brand and image of the stores in which they shop and the labels they wear, tend to pay more to shop at stores that have a nice atmosphere, and believe their friends consider them a fashion trendsetter.
- Price-First Shoppers (17% of respondents): Consumers who state that finding the lowest price is their primary consideration and tend to stick to a strict clothing budget and buy only clothes that are on sale.
- Quality-First Shoppers (13% of respondents): Consumers who select stores where they expect the clothes to last a long time and are willing to pay more for better-quality fabric or craftsmanship.
- Fit/Style Variety Seekers (11% of respondents): Consumers who tend to shop only at stores that carry a wide selection of styles and sizes.
- Treasure Hunters (16% of respondents): Consumers who primarily seek out stores that offer them the opportunity to “treasure hunt” for new or unexpected items.
- Convenience Shoppers (15% of respondents): Consumers whose primary consideration for where and how to shop for clothes is convenience.
Importantly, these segments could be found across all generation cohorts—Millennials (ages 18–36), Gen Xers (ages 37–51) and Baby Boomers (ages 52–70)—albeit with slightly different penetration rates, as shown in Exhibit 1.
Even more significantly, psychographic segmentation did a better job of explaining the differences in shopping behavior among the women surveyed than did their age demographics. For example, consider shopping frequency and average annual apparel spending.
Differences in Shopping Frequency
While Millennials overall shop slightly more frequently than the average woman (but less frequently than Gen Xers), it turns out that Millennials are just as divided as the other generations when it comes to shopping frequency. As with the other generations, the percentage of Millennial women who shopped more than once a month varied strongly according to the psychographic segments identified above. (See Exhibit 2.)
Similarly, the heterogeneity of the Millennials group also lingers when looking at average annual clothing spend. As a whole, Millennials spend 7% below the average for all women. But by segment, Millennials’ annual spending varies significantly and can be higher or lower than the all-women average, as shown in Exhibit 3. Not surprisingly, this wide range of variation in spending behavior between psychographic groups is consistent across all age cohorts.
So What Matters to Different Millennial Segments?
Given that each segment is operating under a very different set of motivations, it’s not surprising that this translates to very different preferences. Here are three examples of how this comes to life:
- “Fashion-Focused” Millennials. Consumers in this segment spend 59% more on apparel per year than the average Millennial and shop at 14% more stores per trip to help accomplish this. When it comes to naming their favorite places to shop, they’re two times more likely to choose designer brand stores and high-end department stores and significantly less likely to choose an online-only retailer. Finally, Millennials in this segment are more likely to be influenced by celebrities, social media, online articles and blogs, and other forms of media than their peers.
“Treasure-Hunter” Millennials. Women in this segment spend 21% more on apparel per year vs. the average Millennial and shop at just 8% more stores per shopping trip. They’re more likely to favor discount stores like Nordstrom Rack, T.J. Maxx and Ross and fast-fashion retailers like Zara, H&M and Forever 21. “Treasure-Hunter” Millennials also enjoy shopping as an activity more than any other group, with or without friends, though they have a slight preference for shopping alone. Of all Millennial segments, this segment is most likely to be influenced by friends and family and least likely to be influenced by a celebrity.
“Quality-First” Millennials. This segment tends to keep clothes for multiple seasons and approaches shopping with a clear understanding of what they want—clothes that stand the test of time—and where to get them. As such, women in this segment spend 38% less on apparel per year vs. the average Millennial and shop at 28% fewer stores per trip. They’re most likely to favor specialty stores like The Gap, J.Crew and Ann Taylor Loft.
Where Age Still Matters
Age does make a bigger difference in the marketing vehicles a retailer or brand uses to communicate with consumers, given their differences in media consumption and influences. For example, it should come as no surprise that the survey found Millennials spend more time on their smartphones and tablets than other generations—an average of 4.9 hours per day vs. 3.3 hours per day for all women. As such, many leading retailers and brands are tailoring their specific brand offering, customer experience and marketing messaging based on their psychographic consumer targets, then overlaying a comprehensive consumer communication plan that identifies which media and influencer touchpoints will be most effective in reaching their consumers across each generational age cohort.
Clearly, Millennials should not be targeted as a homogeneous group. Understanding their behavioral and attitudinal differences will allow retailers and consumer brands to more finely tune their overall brand positioning, in-store experience, online presence and marketing message based on their targeted psychographic consumer segments. In today’s world, which is all about the power of consumer insights and increasingly infinite customization, don’t make the mistake of treating the 75 million individuals in the United States’ biggest population group as if they were all the same.
Pew Research Center, 2016
U.S. Chamber of Commerce Foundation, 2012