Millennials are finally seeing wage increases but they’re spending the extra cash on travel, restaurants and other experiences. “We’re naked. We’re not buying clothing and footwear,” said Sarah Quinlan, Mastercard senior vice president of Market Insights, at the FDRA 2017 Summit in Washington D.C. on Thursday.
Quinlan’s overview of consumer spending described a retail landscape shaped by experience-seeking Millennials who are choosing to live closer to cities and their parents who continue to look for ways to indulge them. Here’s a look at the key trends influencing the way consumers spend.
Baby Boomers never stop spending on their children. “Millennials have saps for parents,” said Quinlan. A Baby Boomer herself, Quinlan admitted that she frequently buys things for her Millennial daughter who works and lives in New York City. She said it’s a trend that footwear brands should consider in their marketing efforts. “Are you marketing to me for my Millennial child?” she asked. “You have to market to me because my generation is the first generation willing to spend on them.”
Experiences trump footwear. “The rich don’t spend; the middle class spends every penny they get,” Quinlan said. Every dollar in a raise goes back into the economy, however, Quinlan said discretionary spending is trending toward experiences, not apparel or footwear. In fact, she said airline tickets were the most popular holiday gift in 2016, followed by hotel stays. Footwear brands can capitalize on Millennials’ wanderlust by being where they go on vacation. As Quinlan pointed out, most vacationers spend a day shopping no matter where they are. “Make certain your brand can be found on holiday,” she said.
Off-price for all. The luxury market is hurting because tourists from China, Russia and the Middle East are pulling back on their spending due to the strong U.S. dollar and political shifts. “U.S. consumers are not willing to spend on luxury,” Quinlan said. “The Americans will not pick this up.” Instead, affluent and middle class consumers are shopping at off-price retailers such as Nordstrom Rack, TJ Maxx and Saks Off 5th. “We like off-price not because it is off-price, but because we love the hunt,” she said.
Department store drama. Quinlan said department store sales declined 10.1% in April, meaning consumers are finding their goods elsewhere. “One of the biggest factors impacting sales is that brands are selling in areas where no one is living,” she said. Instead of suburbia, where most shopping malls are located, Millennials are choosing to live (and shop) closer to their jobs in metropolitan areas. Quinlan noted that department stores are also not using their space well, giving men’s fashion and cosmetics priority on the selling floor. “The best-selling space is taken up by things we’re not buying. This is getting worse,” she said.
Take stock in Saturdays. Retail sales are steady. However, Quinlan said there was a notable dip in sales during August 2015 and October 2016 because there was one less Saturday in each month. “This stresses the importance of Saturday hours and the timing that you’re available,” she said. Small businesses should use their flexibility to accommodate consumers’ busy schedules to their advantage, she added. “People pay full price here. They are willing to pay, but they want personalization.”