Back to the Future
Nov 1, 2007 12:00 PM, By Elaine Misonzhnik
Libby Gronbach, a 15-year-old Connecticut native, spends a lot of time online, like most of her Generation Y peers.
She watches videos on YouTube, checks social networking sites like Facebook and MySpace, downloads songs from iTunes and shares what she finds by e-mailing and instant messaging her friends. Most significantly, however, her online experiences irrevocably shape how she spends her money.
Libby is a fervent comparison shopper. She checks all her favorite retailers' sites to find the best products and the best deals. She e-mails links of items she's considering buying to friends to get their opinions. She even influences her parents' spending patterns, helping to research big-ticket items online. For her, shopping remains a social experience, even when she's just browsing the Internet at home.
And Libby's shopping habits are not only relegated to online. She still spends a lot of time at malls, walking through the stores and making purchases in person, even if she's already made up her mind on what to buy before she's walked out her front door.
It's that dichotomy — Libby's blend of mixing the online and brick-and-mortar channels — that's important for retailers and shopping centers to understand as they shift business models from serving baby boomers — for decades the dominant consumer block — to Generation Y and their quirks.
Libby and her peers are already one of the major driving forces in the U.S. consumer market and they will only grow more powerful. Generation Y — which encompasses the 113 million Americans born between 1979 and 1997, or roughly 37 percent of the current population, is larger than the 78-million-strong baby boomer generation and already possesses an estimated buying power of $629 billion annually, according to Iconoculture, a Minneapolis-based consulting firm. However, that's still dwarfed by the baby boomer's estimated buying power of $2.1 trillion a year.
But there are other factors at play. Generation Y has a strong influence on the spending of parents and other older family members. They already influence up to 50 percent of the $6.5 trillion in overall U.S. consumer spending, estimates Kenneth W. Gronbach, 59, Libby's father, president of the Haddam, Conn.-based demographics and marketing consulting firm KGC Direct, LLC. (Gronbach runs a blog on these topics on his firm's Web site, www.kgcdirect.com.) “My children influence everything, from the color of the car we buy to the house we plan to move to,” Gronbach says. “When we were kids, our parents were aliens to us. My wife and my daughters share the same clothes.”
Studies bear that out. In a shopping habits survey conducted last year by Waterbury, Conn.-based consulting and research firm Harrison Group 79 percent of adults with children in the household said they listened to their kids' advice on apparel purchases, 47 percent on car purchases and 42 percent on major household appliances. “It's not father knows best anymore,” says Harrison Group vice president Don Winter.
Moreover, as baby boomers exit the workforce and their spending power diminishes, Generation Y is graduating from college and moving up the corporate ladder, increasing its annual spending potential.
By 2015, Generation Y will account for 25 percent of the U.S. population and will be responsible for a disproportionate share of spending on household purchases and apparel, says Mary Brett Whitfield, senior vice president with TNS Retail Forward, a Columbus, Ohio—based consulting and market research firm.
“This is such an important age group for us to focus on,” says Mike Nevins, vice president of leasing with the Santa Monica, Calif.-based Macerich Co., a shopping center owner with a 77-million-square-foot portfolio. “Their influence cannot be overestimated, not only when we merchandise the property, but when we give feedback to our retailers on their shopping habits.”
