In the post-recessionary landscape, generational divides are looming larger. Crudely put, in many minds, the Baby Boomers correlate with the “haves” and the Millennials or Generation Y, to the “have nots”. This may be an over-simplification; Baby Boomers are not all wealthy, with the added complexity that some are spending significant amounts supporting their Millennial offspring. Nevertheless Millennials, the majority of whom have entered the labour force since 2007, are clearly at the forefront of significant change in consumer behaviour, driven in part by their recessionary inheritance.
A lost generation?
In Europe, challenges faced by Millennials are compounded by government austerity policies, which many believe have hurt the young the most. This is borne out by spectacular rates of youth unemployment – more than 55% in Greece in 2014 and 51.2% in Spain. It is not solely a European problem though, the rate of youth unemployment stood at 13.0% in the USA in the same year – more than twice the overall rate of unemployment.
Unemployment in Selected Advanced Economies: 2014
Source: Euromonitor International from ILO/Eurostat/national statistics/OECD
Note: Youth unemployment refers to those aged 15-24
These figures also mask a two-tier labour market with younger workers dominating the ranks of those on short fixed-term or zero hours contracts. Not surprisingly then, in the G7 as a whole, the average gross income of those in their 20s has fallen by 0.5% in real terms between 2007 and 2014, compared to a rise of 1.5% for those aged 50-64.
What does it mean for consumer markets?
This has several implications for consumer markets:
- First of all we expect to see a continued emphasis on experience, as opposed to just accumulating more “stuff”. This is true at all ends of the market – Millennials without their own homes to spend money on, and Baby Boomers who are entering retirement;
- The sharing economy, also known as collaborative consumption, should also be a big winner. Possessions do not equal success as much for Millennials, with the possible exception of technology. Fragile employment and a perception of bleak prospects do not tend to elicit purchases of large items for occasional use. A pattern of materialistic consumption no longer makes sense for many younger consumers. Companies can engage with the sharing economy – brands such as Dell, which is participating (and earning brownie points from green-aware consumers) by reselling their own products; and Home Depot, now renting to people reluctant to buy rarely-used tools; as well as clothing brand Patagonia, partnering with eBay to redistribute pre-owned items and extend its customer base;
- An alternative is to focus on affordability – emphasising monthly price installments, rather than the overall cost. This model served to increase consumption in Brazil, with retailers such as Casas Bahia, which sells furniture, consumer electronics and appliances, targeting the poor and lower middle classes through credit - including to those without a formal income or credit history;
- Another interesting option is to focus on offering low cost goods – consumers can see the benefit of ideas which have been successful in emerging markets – such as pared-back design - stripping out the often costly added features which are not core to the product’s function or desirability; and frugal innovation, minimising the use of resources – also good in attracting green consumers. Renault has had success with this approach, with its Dacia range of low-cost cars.
Attitudes do not tend to stand the test of time wholly unchanged; so we can’t simply project the same behaviour of Millennials when they are in their 40s, 50s and beyond. Nevertheless it is unlikely that in twenty to thirty years’ time, Millennials will become their parents. The shift is immense and will have a persistent impact on the economy, society and consumer markets.