Younger set ‘sweet spot’ for retailers

Wal-Mart stores have been popular destinations for millennial shoppers, but an expert in the generation’s practices and characteristics believes the retailer has entered a critical five-year period that will determine whether they’ll keep coming back.

Jason Dorsey, an author, speaker and millennial expert for the Austin, Texasbased Center for Generational Kinetics, said Wal-Mart’s greatest risk comes over the next few years as the generation enters what he described as the “sweet spot.” While millennials have shopped Wal-Mart for a number of

reasons, they’ve moved into the phase in life where they’ll sample other retailers as their income increases, move to different places and begin their own families.

“We’re really getting to the moment where millennials are assigning their loyalty, they’re creating their patterns, they’re conditioning their kids, everything is going on in the next five years,” said Dorsey, who is a millennial. “That’s why this is really the red line for retailers to win us or lose us.”

Millennials are roughly defined as the generation between the ages of 21-38. The group has become the largest in the United States with about 80 million adults, and a Pew Research Center study from May 2015 said millennials have surpassed Generation X as the largest in the U.S. labor force.

At the same time, Dorsey said the generation is surpassing baby boomers in purchasing power. A study from consulting firm Accenture estimates that by 2020 millennials will spend $1.4 trillion annually, representing 30 percent of retail sales.

Quality, value, convenience, authenticity and experiences characterize the generation’s

expectations from retailers. So it’s no surprise companies like Wal-Mart are catering to their preferences in the ongoing battle to win long-term loyalty.

Carol Spieckerman, president of Spieckerman Retail, said most retailers have been “fairly obsessed” with being relevant to millennials, but it has come with challenges. Targeting the generation isn’t as simple as figuring out what they want to buy. It’s also understanding how they like to shop.

“The emergence of the millennial generation has also marked one of the biggest shifts in the history of retail,” Spieckerman said in an email. “Retailers have found themselves chasing a moving target and reacting to ever-changing behaviors and mercurial preferences rather than dictating where and how consumers will shop and what they will want to buy. The good news is that this dynamic is starting to shift as retailers gain access to data from more sources, including social media, and more importantly, as retailers take advantage of new tools that allow them to aggregate and make sense of it all.

“Retailers don’t quite have the upper hand yet, but they aren’t flailing as much.”

Spieckerman said WalMart’s efforts have been evident

on a number of fronts, including its large-scale push for sustainability and investment in e-commerce. Dorsey said Wal-Mart also has done a good job of embracing the most diverse generation with its offerings.

The retailer continues to improve the shopping experience, whether it’s the “clean, fast and friendly” approach in its stores or the continued expansion of offerings like instore or grocery pickup.

Steve Bratspies, Wal-Mart’s chief merchandising officer for U.S. stores, acknowledged the importance of the millennial shopper during an investor presentation on March 8. He said two-thirds of millennials had shopped at the retailer in the previous month, which is a sign the value-conscious generation has the “strongest affinity” for Wal-Mart than any other generation.

“They are demanding a new level of convenience, new expectations,” Bratspies said. “They want a seamless shopping experience. They want to shop Wal-Mart. They don’t care if it’s online, they don’t care if it’s mobile, they don’t care if it’s in the store. They want it to be a seamless shopping experience for them and that’s what we’re working on delivering. And we’re seeing some good results.”

Wal-Mart was No. 1 on a top 10 list of retailers shopped by millennials over a threemonth period, according to a 2015 Nielsen Scarborough study. The study showed 75.5 percent of millennials polled had shopped at the retailer, while Target was second (55.6 percent) and Amazon third (46.8 percent).

But the study also showed that, among millennials with household income of $75,000 or more, the gap narrowed between Wal-Mart (67.8 percent), Target (65.2 percent) and Amazon (59.7 percent).

Spieckerman said remaining relevant will require “continuous innovation and agility” for Wal-Mart as competition for the millennial shopper intensifies. Dorsey agreed, pointing out the number of recent shoppers at the retailer isn’t always an indication of loyalty.

He said Wal-Mart has an immediate advantage because millennials were conditioned to shop at their stores by their baby-boomer parents, who helped drive the retailer’s growth. The recession also benefited Wal-Mart as millennials entered the workforce in a difficult economy, affecting how they shopped.

Dorsey said Wal-Mart was successful in leveraging its size and scale, but pricing and its footprint are not enough to

win over millennials as their purchasing power grows.

“As you make more money or have different choices, you start to change,” Dorsey said. “Look at Amazon. It shows that as much as there is an advantage to having a big location in your neighborhood that has everything you want, at the same time for millennials, they don’t feel like that’s a necessity.”

But Dorsey said big-box retailers can overcome the challenges they face with millennials by continuing to meet their needs. It includes efforts like being part of the community, simplifying shopping and showing millennials they can find unique purchases at WalMart.

Dorsey said the ability to do so is vital for a retailer like Wal-Mart because the millennial generation has become “the leading indicator for retail trends.”

“Every other generation, including the ones before us like Gen X and baby boomers, are starting to communicate, shop and buy the way the millennials do,” Dorsey said. “So what the result is, if you win millennials, you win them and everybody that was before them and you have a head start on Gen Z.

“If you miss millennials, you could actually end up losing the other generation.”