GenX and Millennials Driving Recovery

According to a new report from PricewaterhouseCoopers and Retail Forward, entitled The New Consumer Behavior Paradigm: Permanent or Fleeting?, for the first time in the last three recessions, it will not be Baby Boomers at the heart of the economic recovery, as the recession has taken a bite of their savings and retirement accounts. This time it is the Gen Xers and Millennials who will be driving the recovery.

And, the report notes, shoppers will be more deliberate and purposeful in their spending, as conspicuous consumption will give way to more conscious or practical consumerism.  Rampant deal-seeking will be replaced by more purchase selectivity and the use of shopping techniques and tools discovered during the recession. Additionally, the affluent segment of Generation X and the young Generation Y will lead spending in the recovery.

When it comes to retirement and savings, Boomers have lost the most, which means they now have very different spending habits, according to Lisa Feigen Dugal, PricewaterhouseCoopers' U.S. retail and consumer practice advisory leader. Now it's the Gen X and Gen Y demos that have disposable income, and they spend very differently and have different ways of seeking bargains.

Among Gen Y consumers (those between 18 and 27 for this report) just 25% say the economy has significantly changed their spending behavior, while 36% of Gen Xers say it has, and 37% of Boomers say they have significantly changed shopping habits.

In the past two recessions, Baby Boomers quickly led the recovery. However, this group has been hit hard by the recession at a point in life when their financial commitments loom large and retirement is on the horizon. Marketers will need to look to the smaller Gen X generation and large Gen Y population to fuel growth in the initial stages of the post-recession recovery. Among Gen X, one segment that will have a meaningful positive impact on spending is "up-market affluents" given their life stage needs and above-average spending potential.

A higher proportion of Gen Y's income is discretionary as a result of fewer debts and a less-urgent need to accumulate wealth in the immediate term relative to older shoppers. Furthermore, as this generation is accustomed to instant gratification and demands the latest gadgets, spending on technology staples like MP3 players and smart phones will remain a priority and create unique opportunities for tech-oriented retailers.

Feigen Dugal adds "... there will not be a wholesale return to previous shopping patterns and behaviors. To succeed during the recovery, (marketers) will need to recognize that some shopper segments will still be in a 'recession' shopping mode... "

As shoppers' "wants" are steadily reintroduced into the equation, trading-down behavior related to the choice of retailer, product, or brand will lose some traction in the recovery. However, private label brands will remain a significant factor due to their increasingly higher quality and low cost, since retailers don't have to advertise or promote them to the same degree as national brands.

Findings included in study indicate that one-fifth of consumers will continue to forgo buying items that seem too expensive, resulting in a contraction for the luxury and gourmet foods markets. The emergence of a more thoughtful approach to spending on luxury and non-discretionary goods means shoppers will place a premium on goods that have qualities of timeliness, usefulness, and versatility.

Mary Brett Whitfield, senior vice president at Kantar Retail, concludes that "... retailers and suppliers can take advantage of this "frugal fatigue" and offer affordable do-it-yourself alternatives to pricier products... (shoppers) remain cognizant of today's economic realities and need to balance that with personal desires... "

For the complete report from PriceWaterhouseCoopers, please visit them here

1 comment about "GenX and Millennials Driving Recovery".
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  1. J S from Ideal Living Media, March 25, 2010 at 11:15 a.m.

    This is interesting, but a more important question is: will it mean the end of James Taylor songs in the supermarket? As a GENX kid, I vaguely remember hearing then-current, pop music playing the grocery stores (sometimes it was the Muzak version or a recent hit, but still). Unfortunately the playlist NEVER changed; I have heard "Muskrat Love," "Midnight at the Oasis," "I Believe in Miracles," generous amounts of Motown, and every conceivable James Taylor song while shopping over the past year. I hate 1960-70s pop songs; I've been listening to them (while shopping) for 45 years, and I'm sorry Mr. Taylor, but I have had it. Your enormous royalties train must come to an end. Such music is "other" to me. It is anathema to me. It has passed from "boring to tears" and has become excruciating. I'm sure the grannies buying 3 frozen meals may have especially appreciated the Captain & Tenille marathon playing at Albertsons the other evening, but while I was filling my basket shopping for my house full of children, I did not. I don't remember songs from from the 1920s playing at the grocery stores when I was a child; no Cab Calloway; no Al Jolson. So why am I being subjected to the same date range of music now? My dollars are worth as much as any baby boomer's, and I deserve background shopping music created during my actual lifespan. Current grocery store music, for me and my money-spending family, is like a daily trip to the pop music museum of horror. So, music programmers of the world, hear me: No more baby boomer music. It makes me nauseous, not ready-to-spend. No more music from the "Big Chill" or "Saturday Night Fever" soundtracks. Play something from the "Twilight" soundtracks, or "Shrek" soundtracks, or heck, even the "Wedding Singer" soundtrack. Instead of James Taylor; try Jack Johnson. Instead of Simon and Garfunkel, try 30 Seconds to Mars. Instead of the Village People for a peppy number, try Lady Gaga, or Smash Mouth, or Madonna, or Culture Club. Or even "Generation X" itself; "Ready Steady Go" would keep me shopping ten times longer than "Have You Never Been Mellow?" I don't expect Jello Biafra or Henry Rollins or Ian Mackaye, the music of /my/ teen years, but I will burst into tears of frustration if I have to listen to Neal Diamond or Barry Manilow or Engelbert Humperdinck one more time while waiting in checkout. I have left the store over hearing "Feelings" before and so help me, I will do it again. And again. And again.

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