Some recent stats show another startling shift in the world of retail—about 15 percent of U.S. malls will fail or be converted into non-retail space within the next 10 years, according to Green Street Advisors. Retail consultant Howard Davidowitz also expects as much as 50 percent of America’s shopping malls to fail in as little as 15 – 20 years.
That sounds pretty bleak. And for many retailers, it is. But in taking a step back, we see that it’s nothing more or less than another step in the evolution of retail. Adaptation is—and always has been—the only way to thrive.
At the core of this retail evolution, we have millennials and their peculiar, online, mobile shopping habits. They are forcing retailers to pivot—but whether millennials are good, bad or ugly for your business just might come down to how you choose to respond.
From Yahoo! Finance comes the (ever-salacious) headline, “millennials are the key to saving retail,” according to contributor Nicole Goodkind. “Millennials spend about $600 billion annually and by 2020 their retail spending is expected to hit $1.4 trillion per year—about 30 percent of all retail.”
One of the most promising attributes of millennials is that they never feel like they can’t shop. Dealing with insomnia? Pull out the phone and shop. Bored at the doctor’s office? Pull out the phone and shop. They are constantly in the market, giving retailers unlimited access to their audience.
The mode of payment, however, is starkly different from the status quo: while Gen X and older purchase in stores 72 percent of the time, millennials only walk up to the register 57 percent of the time. So why not buy something that doesn’t have to be shipped? It’s in the reviews and option comparisons and price matching, according to Goodkind’s article. The smartphone-wielding generation knows that they never have to buy blind, and their behavior has changed accordingly.
That’s a good thing for retailers, if you’re willing to pivot to meet demand.
But Forbes tells a different story—or rather, shares a different perspective. In “millennials: Double Trouble for Retail,” Forbes contributor Robin Lewis describes a bleak outlook for malls, brick and mortar and anyone whose stock code isn’t “AMZN.”
But they both agree on one point: millennials don’t buy in stores as often as they do online—or, to be more specific, on a mobile device. The result, however, is that it’s effectively shutting down malls and retail locations, forcing retailers into a costly—and risky—pivot that redefines business models for retailers of every size, shape and color.
That’s bad, if you’re not watching the signs and measuring your specific audience.
CNBC’s Kelli Grant delivers what I find to be the most startling revelation of them all: millennials are “low on social trust,” according to Pew Research. The article states, “Just 19 percent say most people can be trusted, compared with 31 percent of Gen Xers and 40 percent of baby boomers.”
Let that sink in for a moment. The generation that catapulted Facebook and Twitter—two social networks—to a level of ubiquity second only to Google is “low on social trust.”
Grant’s article “How the least-loyal generation is shaping retail” informs us that millennials are the least likely to adhere to a given brand, mostly owing to the fact that they don’t trust people like generations before have done. “You can’t base your business model on repeat purchase,” Pace University marketing professor Larry Chiagouris says. “You have to compete for the loyalty with each purchase.”
However, Accenture Research disagrees. According to a study targeting millennial buying patterns, 95 percent or more of millennials want their brands to actively court them, including sending them coupons and regular deals. It’s hard to gain their trust, but once you do they often remain extremely loyal.
That’s ugly, if you’re not up to the challenge.
How retailers can respond
Good, bad or ugly, retailers have to do what they always do: adapt. Here are five tips from Jeff Fromm, founder of Share.Like.Buy and author of Marketing to Millennials, for creating a successful millennial sales and marketing strategy:
- Millennials are willing to share their information with retailers, which makes them great candidates for loyalty programs. But the loyalty programs must be simple, beneficial, and save them money.
- Millennials like to know the story behind what they buy: where a product came from, how was it made, what makes it unique. Educate them.
- Once you have gained their brand love, Millennials will be your biggest advocate. They will be an evangelist for you to their peers and other generations as well.
- Millennials are always looking to save money. They earn less and they have families to feed. If you want them to trade up, you need to give them a compelling reason why.
- Millennials don’t do all of their shopping online (despite popular opinion to the contrary).
To reach millennials, you don’t just have to meet them on their grounds but foresee what they are really looking for. But no one can know how exactly to pivot until you know your audience. Because knowing, as they say, is half the battle.