As we kick off what will be a two-part series on the Millennial Generation—those born between 1980 and 2000—and their many differences in tastes, preferences and habits from their elders, our aim is to identify some of the nuanced labels and trends associated with this generation and compare them to the actual data.
With the rise of the peer-to-peer sharing economy, we are witnessing a revolutionary way for individuals and companies to go to market, and for consumers to shop and interact with them. Like it or not, it’s quickly becoming the norm for younger Millennials and, especially for their children, it may be all they ever know.
Will Millennials largely avoid “ownership” and instead create new economies based on sharing, renting, leasing, etc.? With a struggling economy, no job market to speak of and no positive economic news on the horizon, are Millennials destined to be perpetual transients unable to put down lasting roots in a single place? And by extension, is the American dream of home ownership truly a thing of the past? Stay tuned while we tackle these questions and others with some of the most recent data available on this unique generation of Americans—the largest generation (92 million) in US history.
“You kids don’t know how good you’ve got it” is a worn truism that each generation likes to heap on its children in an attempt to shame them and/or remind them of their many blessings in life. Times change, the pace of technological advancement quickens, and it’s an American rite of passage to poke fun at the perceived softness of successive generations. While none of us born during the last century can truthfully spin the age-old yarn of walking to school seven-miles-uphill-both-ways in a continuous blizzard, we have experienced firsthand a rapidly changing, technology-driven culture and we can honestly deduce that kids these days are in fact… different.
To illustrate my point, I’ll share a brief story recently recounted to me by a colleague whose 17 year-old daughter attends a typical suburban, Midwestern high school. A fellow classmate was driving herself to school one morning this past winter and, despite the congested traffic and snowy conditions, decided that texting was more important than focusing on the road. Needless to say she lost control, slammed into the median, and the vehicle rolled over a couple of times before skidding to a halt on its roof. Thankfully, the young driver was uninjured.
Now, I would posit that most readers of this newsletter—if found in this very emergency—would follow a thought process that goes something like:
- Verify consciousness, ensure arms and legs function
- Unbuckle seat belt, quickly escape vehicle that could be a potential fire hazard
- Move a safe distance from vehicle while being mindful of other traffic
- Call 911 for help
But the young driver in question couldn’t even get to step #1 before the addiction to technology took over. Her very first reaction? She took a “selfie” while still strapped into the seatbelt of an upside-down vehicle and posted it on Facebook.
It may be an exceptional case of narcissism-run-amok, but it’s not a thought process anyone over the age of roughly 35 could possibly fathom. It is, however, broadly indicative of the importance of technology-at-your-fingertips and social media in the lives of most millennials.
What sets Millennials apart?
According to a comprehensive 2010 Pew Research Center study titled, “Millennials: Confident. Connected. Open to Change,” the prominence given to technology is markedly different from other generations. The study notes, “When asked to name some ways in which their generation is unique and distinct, responses differ widely across age groups. Among Millennials who see their generation as unique, technology use is the single most popular response. Roughly a quarter of those under age 30 (24%) say technology is what sets their generation apart.”
To quantify the importance of technology use in their daily lives, 83% of those Millennials surveyed in the study admitted to sleeping with a cell phone either on or next to the bed. “It’s not just their gadgets — it’s the way they’ve fused their social lives into them. For example, three-quarters of Millennials have created a profile on a social networking site, compared with half of Xers, 30% of Boomers and 6% of Silents. There are big generation gaps, as well, in using wireless technology, playing video games and posting self-created videos online,” the study adds.
A dependence on technology and the many intricate, if subtle, ways that it contributes to the lives of millennials cannot be overstated. While previous generations tend to be more cautious when it comes to testing and implementing new technologies into their lives, Millennials eagerly embrace whatever is state-of-the-art. They have grown up in an environment where rapid technological advancement has been the norm, and they understand that what is considered to be technologically valuable today may be worthless or passe tomorrow. They operate under the expectation that technology has always been, and will always be available to them 24/7, and they feel entitled to its benefits until the next big invention comes down the pike.
The Pew study also adds, “Other ways in which millennials see themselves as unique include their music, pop culture and style (11%), and their liberalism and tolerance (7%).” How does this preoccupation with technology and entertainment affect millennials’ understanding of their role in American society? Is their worldview diametrically opposed to ownership in general and if not, what criteria are important to them when making purchasing decisions?
Millennial Purchasing Preferences
The hunt for a good deal seems to be a tendency that knows no generational boundaries. A Goldmann Sachs report on this very subject notes, “Millennials’ affinity for technology is reshaping the retail space. With product information, reviews and price comparisons at their fingertips, Millennials are turning to brands that can offer maximum convenience at the lowest cost.” When asked what factors make them loyal to a brand, the data is interesting:
- Millennials: 33%
- Non-Millennials: 27%
- Millennials: 55%
- Non-Millennials: 59%
Not surprisingly, Millennials also favor companies that utilize social media (34%) and in 2014, over 86% of those between the ages of 16 and 34 had purchased something online within the previous 12 months. Interestingly, a June 2013 Accenture report on Millennials notes that they actually prefer visiting brick-and-mortar stores to shopping online because they can touch, feel or try on an item. They tend to price-shop both online and in person before making an actual purchase, at which point they expect a seamless transaction experience regardless of the shopping method.
The report continues, “They demand a customer-centric shopping experience—one tailored to their wants and needs as valued customers. Many seek personalized, targeted promotions and discounts as the price for their loyalty. We found that 95 percent or more of Millennials say they want their brands to court them actively, and coupons sent via email or mailed to their homes currently (or will in the future) have the most influence on them.”
Finally, Accenture notes that “More than half (55 percent) of the survey respondents in all three demographics [Millennials, Generation X and Baby Boomers], said that they seek out ‘the cheapest return option.’” This data confirms the price/quality percentages noted above, and it speaks to some of the incorrect presumptions about Millennials being impatient, indifferent or entitled. While they have the technical shrewdness to quickly navigate between the physical and digital worlds, they use these skills to find the lowest price on the market and prefer to purchase from businesses that make an effort to personalize their shopping experiences.
Obstacles for Millennial Consumers
The single biggest obstacle for Millennial consumers is a lack of real economic opportunity and earning potential. The effective unemployment rate for this generation is roughly 14% and even for those who have been fortunate enough to have found jobs, they are usually low-paying. Millennials are graduating from college with an average student loan debt of $33,000 and more of them have debt exceeding $40,000 than at any other time in US history. The result is a generation that is forced to delay some of life’s major milestones including marriage, parenthood, and home buying. Consider the statistics:
- Almost 50% of Millennials have less than $5,000 in savings.
- In 2010, almost 30% of those aged 18-34 were living with their parents.
- The median marriage age in 2010 was 30 compared to 23 in the 1970s.
- In 2012, 23% of those aged 18-31 were married and living in their own household compared to 56% in 1968.
With more than 22 million Millennials living at home, the chain reaction of delaying major life decisions has a much broader impact. And who can blame them? Real wage growth over the last few decades has remained stagnant while inflation has not. For many Millennials, the cost of those milestones is getting further out of reach by the day.
- In 2014, the average wedding cost in the US was over $28,000.
- In 2013, the average childbirth cost in the US was over $18,000.
- In 2014, the average annual cost of child care in the US was over $7,300 per child (some state averages were as high as $16,000).
- In 2013, the median rent price in the US was over $950.
- In 2014, the median price for an existing home in the US was almost $190,000.
The obstacles are real, and the statistics confirm this. Add ever-increasing monthly utility, food and healthcare costs to the mix and the situation is even more challenging. And with tighter credit and lending practices than in years prior to 2008, many Millennials must be wondering if “someday” will ever come.
But for all the bleak economic data that seems to be stacked against them, Millennials as a group appear to have a keen understanding of the importance of prioritizing. To be sure, there are needs and desires that this generation is willing to save for and spend on and they will continue to leverage the use of technology for their own benefit, particularly when it comes to realizing those ends.
Beyond the high-level trends and statistics outlined in this first part of the series, what are some of the unique ways in which Millennials are reshaping existing markets and creating new ones? What industries offer little in the way of perceived value and will struggle with Millennial customers in the future? What does the specific data tell us about their long-term goals and, most importantly for those industries affected by housing markets, what does the future of home ownership look like for this, the largest generation of Americans in history?
Join us next month as we learn more about Millennials by the numbers.