In less than three years, the oldest millennials turn 40. At that point, the biggest U.S. generation also gradually becomes the nation’s dominant consumers. As this group graduates to middle age, there are plenty of reasons for retailers to feel confident.
Millennials make up 27 percent of the global population, accounting for more than 80 million U.S. residents. Based on size alone, that’s a huge demographic opportunity for the economy. Take millennials and the younger Gen Z population together, nearly half the U.S. population, and it becomes clear that the future of consumer spending looks strong.
To turn those numbers into results, we have to understand how demographic and macroeconomic factors are creating unique pressures and future opportunities for the retail real estate industry.
We’ve had a challenging economic environment. Wages adjusted for inflation have been stagnant. Median household income is flat. Millennials spent their early adult years during the Great Recession, and the downturn erased tens of millions of jobs. As a result, many millennials are starting their careers a bit later. They also are getting married at an older age than their predecessors. And they have more than six times the amount of student loan debt as baby boomers.
These are big macro issues that affect the economy. They are also real challenges that will greatly influence what millennials buy, and how they spend their money.
Millennials were raised with the Internet and mobile devices. Technology allows them to access information, research products and connect with their friends in a way that no generation before them thought would be possible. But even in this digital age, Millennials place a premium on social interaction and experiences. They are health-conscious and service-oriented. You might find them working out in a small group training class, or spending on brands that support causes they believe in. What’s ultimately driving millennials buying behavior is a personalized, authentic experience.
The industry is adapting to these motivations by elevating its game, just as it’s done numerous times before. Retailers are delivering new experiences and services. The “athleisure” brand Lululemon, for instance, literally lays down yoga mats to offer in-store classes to customers. Malls are evolving too, bringing in more restaurant options, dine-in movie theaters and even fitness studios. As the CEO of Smoothie King shared recently, the numerous flavor combinations are as much about a state of mind as they are about taste. These decisions are lifestyle-driven, and show how retailers and developers are listening carefully to what consumers want to test and buy.
Millennials are knowledgeable, well-informed consumers. They’re the most educated generation in U.S. history. They are likely to have a higher household income than previous generations. And they’re focused on social good. As millennials settle down and reach their prime spending years, they’ll have the mindset and tools in place to sustain a healthy retail environment for decades to come.