If you’re marketing to the “new consumer,” you’re probably on the wrong track.
Speaking at the Shoptalk retail tech conference in Las Vegas last week, Lokesh Ohri, a partner in Deloitte’s retail and consumer practice, debunked a few commonly held beliefs about today’s consumer. The modern shopper is often characterized as displaying no loyalty, having zero time and wanting nothing to do with products because they’re only interested in experiences. And while on the surface, these things might seem true, Ohri said the industry needs a better understanding of shopping trends, what’s driving them and how organizations need to pivot as a result.
For instance, his clients are constantly asking him to provide a roadmap for appealing to millennials. Ohri’s response is this group isn’t the panacea they’ve been made out to be.
“I have bad news. The millennial is broke,” Ohri said. “They’ve never been more broke in the last 30 years. Their net worth has come down 35 percent.”
Ohri pointed to student loan debt as a major drag on the cohort. But, you might say, who’s keeping all of the direct-to-consumer brands springing up on social afloat if this demo has no money? It’s 20 percent of millennials who are driving between 60 percent to 70 percent of shopping value, Deloitte has found.
“The millennial is not winning, so winning with them will mean you will have to have a very different strategy,” he said.
Ahh, but baby boomers are flush with cash, right? They’re empty nesters with money to burn. Not quite. According to Ohri, 75 percent of these consumers are Caucasian and this demographic has lost more than $10,000 a year in median income over the last decade.
Even with less discretionary income, Ohri said when you look at millennials, their spending patterns are the same as they were 20 years ago. “The consumer at the macro level is very similar. They’re not that different,” he said.
Shoppers are still spending on things like food, housing and entertainment. And, he said, there’s no indication that they’re forgoing products for experiences. He argues the reason a category like apparel is commanding a smaller share is simple: “Apparel has seen a slight reduction in share of wallet not because people are wearing less clothes but because of deflationary pressure [caused] by the number of choices people have,” he said.
The amount of choice in the market overall has driven the narrative that store traffic is down, Ohari said. In fact, Deloitte found, traffic is actually up for some retailers. The reason why it might feel like there are fewer shoppers, is the amount of options means the traffic is more diffused. “Let’s not confuse choice with change in this situation,” he cautioned.
That said, shoppers’ economic realities have created a divide, with luxury and value-based stores outperforming and middle-of-the-road chains struggling. And the “hollowing out” of the middle has intensified over in the last year, Ohri said.
“The reason for that is 90 percent of the wealth accumulated in the U.S. in the last 10 years has gone to the top 20 percent of the population. Net discretionary income for the top 20 percent has shot up quite considerably,” he said. “The bottom has actually lost.”
The result is the retailers that are on the way down are on a very steep slope. Deloitte found that 16 percent of stores have lost 90 percent of the trips. On the other hand, 22 percent have gained most of the trips. “The people who are losing are bleeding and the people who are winning are really winning in the market,” Ohri said.
Even as demographics, economics and other metrics change, Ohri said retailers need to keep focus on the fundamentals. Price, product and convenience continue to motivate consumers. “Those are still the key drivers to consumers’ trips to stores and online as well,” he said.