It may be time to stop swilling that Millennial Kool-Aid. While stores have been relentlessly wooing Gen Y for years now, a new report from Forrester suggests they’ve gone overboard, and that Americans 55-plus are the best chance for growth. And in another shot of consensus-shattering heresy, the report says that for all the love marketers have lavished on technology, it’s the economy — not tech — that’s driving the changes.
“While young shoppers often get the most attention, they are a difficult demographic to serve,” writes Forrester analyst Sucharita Mulpuru, in her recent “The Future of Shopping.” “They have less income than any other group and have been declining as a segment of the population.”
And while retailers have been focused on everything from digital wallets to tablet optimization to same-day delivery, she says they are missing the bigger picture. “These topics are distractions from the real challenges in retail,” she writes. The most important shift has been the decline in true spending. In the last 40 years, most U.S. households have been spending less in major shopping categories. And since 2000, the only real gains have come from population growth. The only two segments that have made gains — online retail and warehouse clubs — have come at the expense of other channels.
The obsession with Gen Y, including the “overemphasis on the impact of innovations like smartphones, eCommerce, and social networks on young consumers is misguided,” adding that tech affects shoppers of all ages. Besides, she says, the debt-laden younger Millennials are broke: “Consumers under 25 are hindered by unique economic circumstances now that make them less attractive shoppers altogether.”
At the other end of the age game are older shoppers who are living longer, and spending significantly more. “Following decades of savings and building equity in homes, older consumers have made significant financial gains,” she says, and are the only population segment that have experienced a bump in real income. “Households over 65 have experienced a 30% gain in purchasing power since 1973,” she says, “and even the next younger cohort, households ages 55 to 64, has gained 11% more.” Older consumers are currently driving 35% of all retail spending.” (The restaurant category is a notable exception, with younger shoppers have a much bigger impact.)
But while tech may not be the primary drive of changes in demographic segments, it is the retail industry’s best chance at surviving the current climate, which she describes as “a blood bath.” Near-term strategies include more mobile tools and better omnichannel fulfillment. But for real financial health, she writes that stores need to be thinking about longer-term tech investments, including 3D printing, biometrics and voice recognition.