Millennials are finally forming households: what it means for retailers
Young American adults have put off establishing families and setting up households longer than any generation has previously. More and more millennials have opted to live with their parents longer, defer marriage and buy houses at a later age.
A startling report from the U.S. Census Bureau published earlier this year highlights just how much young consumers have changed in terms of how—and where—they live:
- In the 1970s, eight in 10 people had married by the time they turned 30; today, the US population reaches that benchmark only at age 45.
- In 2016, more 18–34-year-olds lived with their parents than with a spouse, a reversal of the pattern seen a few decades earlier.
- In 2016, some 29% of 25–34-year-olds were homeowners, down sharply from 52% in 1975.
But American millennials are finally establishing households. We consider millennials to be those born between 1980 and 2000, which means the oldest members of the group are now in their mid-30s. Even the most reluctant of these will admit they cannot live in their parents’ house forever, and most will be climbing career ladders, building families and setting up homes in the next several years.
Figures from the National Association of Realtors back this up: millennials are the largest group of homebuyers in the U.S., now accounting for 34% of home purchases, while Gen Xers, the preceding generation, account for 28% of home purchases.
As greater numbers of millennials move into the crucial mid-30s bracket in the coming years, the generation will become core to the U.S. housing market and, in turn, to those retailers that sell big-ticket items such as furniture, appliances and home-improvement products.
Millennial Households Set to Drive Changes in Big-Ticket Retail
- Value-Conscious Shoppers Will Fuel Growth at Lower-Price Retailers
Millennials are value-conscious shoppers: survey after survey has found that younger adults tend to be more frugal than their older peers when it comes to purchasing everything from furniture to groceries to beauty products. In part, this demand for value is due to the fact that younger consumers have not yet reached their peak earnings years. But we think this frugality is also partly due to a cohort effect, and that less favorable work compensation, higher student debt levels and an apparent preference to spend on experiences rather than on goods will continue to impact millennials’ retail spending in the coming years. The National Association of Realtors found that 46% of millennial homebuyers surveyed in 2017 reported having student debt, and that it averaged $25,000.
So, the rise of millennial households should support long-term growth at those big-ticket retailers that enjoy strong value credentials. Winners are likely to include specialist retailers such as IKEA and nonspecialists such as Target, Walmart and—yes—Amazon.
- Millennials Will Drive Growth of Internet Pure Plays
Millennials are also more likely than older age groups to shop online—as documented by innumerable data points and surveys, including our own. Moreover, as younger consumers establish families and climb career ladders, their busy lifestyles will likely further fuel their use of e-commerce.
This familiarity and comfort with online shopping will provide tailwinds to Internet-only retailers whose brands or offerings resonate with millennials, and pure-play names such as Wayfair and Amazon look well positioned to capture share. Big-ticket brick-and-mortar retailers that are seeking to capture millennial market share will need to offer online and cross-channel services that match those of the best-positioned Internet pure plays.
Low-Price, E-Commerce-Focused Retailers Are Likely to Win Share
The biggest long-term retail winners are therefore likely to be those that combine a strong reputation for value, a market-leading e-commerce offering and a brand that resonates with millennials. Amazon remains the most obvious name here, and Walmart-owned Jet.com could carve share, too. Long term, we expect to see further e-commerce acquisitions and investments from lower-price brick-and-mortar retailers as they cater to the demands of millennial big-ticket shoppers.
Original article can be found here.