In a year when holiday spending on gifts, travel and entertainment was down 1 percent from the year prior, one age group bucked that trend in a huge way.
Millennials, perhaps aided by increased incomes due to “The Great Reshuffle,” told us it would spend a whopping 11 percent more than it did in 2021, according to PwC’s 2022 Holiday Outlook. All other age groups surveyed (Gen Z, Gen X, baby boomers) reported planned spending of around the same or less than they did in the year prior.
Millennials boasted an average budget of $1,823 — 27 percent higher than consumers overall. Furthermore, 48 percent of them said they would spend more during the 2022 holiday season than they did in 2021 (compared to 35 percent for all age groups).
A generational divide of this caliber presents a massive opportunity for retailers to capitalize on millennial spending power in 2023, and well ahead of the next holiday shopping season. But what drives this generation’s interests (and their wallets) differs dramatically from the demands and expectations of other generations.
The Generation Gap
While other age groups tend to be more inclined to spend on physical items like cars and jewelry, millennials’ spending priorities are markedly different. They want to be wined, dined, entertained and cultured, and are willing to spend big bucks to indulge in these experiences.
These desires are largely driven (and fed) by the ways millennials live and work. More than any other generation, millennials are more likely to embrace the life of a digital nomad — working from unique, remote corners of the Earth and dedicating a sizable chunk of their salaries and time off to travel. It’s safe to expect millennials’ penchant for jet setting to remain robust throughout 2023.
In addition, millennials are more likely to be influenced by “influencers” on social media. How they spend their money on travel, experiences and goods largely depends on what they see on their social platform of choice. This further impacts how retailers should approach their marketing strategy in 2023 in attempts to secure this influential demographic.
Earn Their Trust
Millennials are the most likely to belong to a brand or retailer loyalty program (60 percent vs. 55 percent overall) and possess a brand/retailer credit card (66 percent vs. 59 percent overall).
These loyalty perks paid off for the brands during the holiday shopping season and are poised to continue. They influence millennials’ online browsing by 77 percent and in-store shopping habits by 79 percent — higher than any other age group.
However, in order to succeed, loyalty programs should go beyond offering points and rewards. Leading programs give loyal members access to exclusive products, events, and in some cases services.
Another way retailers can win consumer trust is by providing easy and seamless post-purchase service, especially with regard to returns.
Returns continue to be a significant cost to retailers, and many are opting to share that cost with the consumer by having them pay the shipping costs. This will likely have a negative impact on trust in the eyes of the consumer and potentially cost the retailer more, due to lost sales, in the long run.
Give Them Options
Millennials are driving growth in the newer online model of “buy now, pay later” (BNPL). During the 2022 holiday shopping season, 20 percent of this age group utilized BNPL as their preferred means to shop, compared to 13 percent of consumers overall.
Retailers would be well served to tailor messaging and meet these higher-spending customers where they are. For example, 29 percent of younger millennials (ages 26-30) told us they would holiday shop on their smartphones — more than any other age group. Advanced analytics will help further personalize the shopping experience and meet their expectations.
Speak Their Language
Millennials are also more health and values conscious. They were more likely to support wellness brands than all other age groups (51 percent vs. 35 percent overall) during the holiday shopping season and joined the rest of consumers in wanting to know more about a company’s environmental, social and governance (ESG) efforts. As touched on earlier, millennials are generally more likely than their elder counterparts to glean this knowledge from social media.
It’s hard to argue with the data: In order to have a fruitful 2023, retailers must fight to win a share of millennials’ spending power. By focusing on loyalty programs, giving them shopping and spending options, and following through on meaningful, clear ESG activations, they can do just that.
Kelly Pedersen is the retail leader, PwC US.
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