Retailers Must Adapt as Baby Boomers and Gen Y-ers Alter Their Shopping Patterns
Oct 6, 2009 11:19 AM, By Elaine Misonzhnik
Value driven
While boomers and Gen Y-ers have become more value-driven, they demonstrate this new mindset in different ways. An August 2009 study by TNS Retail Forward, a Columbus, Ohio-based consulting firm, found that 46 percent of surveyed boomers bought only the things they needed this year, compared to 34 percent of Gen Y-ers.
In addition, 41 percent of boomers reported buying fewer things, compared to 28 percent of Gen Y-ers. Boomers are shopping less overall partly because they have accumulated plenty of clothes, books and electronic gadgets over the years, say researchers. Gen Y-ers, on the other hand, are still buying discretionary items, but looking for less expensive versions.
As a result of their necessity focused mindset, whatever shopping trips boomers do take are likely to involve visits to supermarkets and drug stores, mass merchants, office and pet supply stores and home improvement stores. Roughly 22 percent are shopping more at value and discount stores, compared to 14 percent of Gen Y-ers. Moreover, boomers say they are likely to hold on to their frugal ways even after the economy rebounds. According to the survey, boomers say the saving behaviors they will most likely retain include taking advantage of discount offers and doing more comparison shopping before making a purchase.
“They will be in a saving mindset until they feel better about their personal spending power,” says Tim Henderson, senior director and consumer strategist with Iconoculture. “It’s hard for me to imagine that someone who lost their job is going to feel more confident about their spending just because [Fed Chairman Ben] Bernanke said, ‘We are out of the recession.’”
Members of Gen Y, on the other hand, continue to shop for what TNS calls “self-expression,” in addition to buying necessities and hunting for bargains on durable goods. Self-expression involves consumption of lifestyle goods like books, CDs and games, which bodes well for those retailers. Examples of retailers that offer self-expression include Nordstrom, Victoria’s Secret and the Gap, according to TNS.
Brave new world
What does all of this mean for retailers? For one, it means certain chains will continue to have a natural advantage going forward. Target, Wal-Mart, Costco, BJ’s Club, JCPenney, Kohl’s, TJ Maxx and Marshalls were perfectly positioned for this downturn, offering what customers perceive as quality products at a fraction of the prices of specialty retailers. And since boomers will be in a saving mode for some time, they will likely continue to shop at those stores.
“If you look at past [economic] recoveries, particularly after September 11, most of the people that traded down very quickly bounced back and resumed their normal shopping habits,” says Craig Johnson, president of Customer Growth Partners, a New Canaan, Conn.-based consulting firm. “Here, we believe there will be much more of a permanent change in shopping behavior. Wal-Mart isn’t going to retain all its new customers, but we think it will retain at least 50 percent because people will say, ‘Hey, the merchandise here is pretty good, the pricing is pretty good and the service is much better than in the old days.’”
That doesn’t mean, however, that specialty retailers are doomed to flounder. Such chains will simply have to find new ways to offer customers value, experts say. Grocery chain Trader Joe’s has thrived under new market conditions in spite of its gourmet reputation by offering a wide variety of private label products, which are often more affordable than mass brands but equivalent in quality. The chain guarantees that all products sold under its private label are made using non-genetically modified ingredients so customers feel they are getting a great deal for less. Plus, they don’t have to spend as much time comparing products from different brands to figure out which one is better, notes Asturias.
To sell discretionary goods, retailers might have to labor harder, especially when it comes to boomers, who don’t need many discretionary items, says Ann A. Fishman, president of Generational Targeted Marketing LLC, a New York City-based marketing firm. She advises apparel retailers to target potential customers with marketing materials that show how one item can be used in different ways, creating the idea of more value for less money.
“I get an awful lot of emails from stores that say, ‘Come see the five must-haves for fall,’” Fishman notes. “That doesn’t relate to today’s society—there is nothing that you have to have fashion-wise if you don’t know how much money you are going to have. So if you are Gap and you have a baby boomer’s email address, send them an email with pictures of the fall line that would show five different ways to wear [the same item] that would be kind to different body types. That’s much more effective than old style marketing.”
Fishman also advises mall owners to hold free fashion shows targeting different age groups to induce impulse buying. The shows can take place in mall common areas on a weekly or a monthly basis, each time showcasing products from different stores. For boomer audiences, she advises using regular people as models and emphasizing the versatility of advertized pieces.
For Gen-Y members, who have highly segmented fashion sensibilities, Fishman recommends mixing apparel styles within the same show, sending out sweat shirts followed by prom dresses. To take advantage of their thirst for bargains, retailers can offer discounts when Gen Y-ers bring their friends to shop at the store—for example, they can get 5 percent off when they bring in one friend, along with 5 percent off for the friend and 10 percent off each when they bring in two friends.
“This group is really big into word-of-mouth marketing, so what you have to do is please one of them and the rest will follow,” Fishman says.
What retailers should not do is get bogged down in the idea that a customer’s perception of value will be related to price alone, say Henderson and Asturias. The socially conscious baby boomers, for example, might not replace their household appliances, waiting to buy new ones until old ones are no longer working. But when they do buy, boomers will pay more for an energy-efficient version.
Female boomers might have shopped for clothes at discount stores in the past year or two, but they might be willing to pay more for certain apparel items if they feel they are more durable than what the discounters are hawking. The Gen Y shoppers might no longer be willing to pay $80 for a t-shirt from Abercrombie & Fitch, but they will go into uncool stores like JCPenney if they feel they can find a fashionable outfit in a size that fits them, says Kenneth Gronbach, principal of KGC Direct, a Haddam, Conn.-based consulting firm and author of “The Age Curve: How to Profit From the Coming Demographic Storm.”
“In 2008, because consumers were driven by fear, value became a matter of price,” says Henderson. “Now, consumers have learned ways to save. In 2009, value does mean there is going to be a price component, but there will be other measures, as well. It can be the quality of the merchandise, it can be great customer service. So define for that consumer what value means in current terms.”
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