Millennials are one of the largest generations in history, and they're on the cusp of their prime spending years. These are the industries that stand to benefit the most.
Popular media coverage of millennials often fixates on the industries the generation is allegedly killing and their supposed fiscal irresponsibility.
But over the next few decades, Generation Y will enter its prime spending years — and it’s set to receive $30T in wealth from baby boomers and Gen X.
This transfer of wealth has already begun transforming a range of industries. Some industries benefiting from millennials’ increased spending power, such as travel, reflect well-worn Gen Y tropes like the general preference for “experiences” over things. Others, like car ownership and camping, show that many of the claims about millennials’ different spending habits are overblown, and that significant continuities exist between Gen Y and their parents and grandparents.
However, these industries won’t thrive unchanged.
The companies that will come out on top are those that are reorganizing and reprioritizing around Generation Y. This means they’re embracing changing preferences to offer more sustainability, affordability, and flexibility in their products and services. They’re also embracing new technology and the unprecedented discoverability and customer connections it allows.
In this report, we dive into some of the industries — from frozen foods and fast casual dining to micromobility and personal finance apps — that could massively benefit from the rise of Generation Y.
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Activities & hobbies
Activities & hobbies
As more millennials have children, they’re embarking on camping adventures in the great outdoors as families
Camping has enjoyed significant revenue growth over the last several years, largely thanks to millennials.
Total wholesale camping equipment sales rose above $2.5B in 2018, up from less than $2B in 2013 . Also in 2018, nearly 80M American households went camping — a new high.
Kampgrounds of America, an association of almost 500 North American private campgrounds, says the industry’s “aggressive growth” is largely attributable to an influx of younger campers, who are camping in larger numbers and camping more often. Last year, 56% of all new campers were millennials (up from 51% in 2017), and 41% of total reported campers were millennials.
Part of millennials’ enthusiasm for camping springs from the fact that many of them are entering their prime spending years and starting families of their own. Over 1M millennial women are becoming mothers every year, meaning Gen Y now makes up the majority of annual births in the United States, according to the National Center for Health Statistics.
These shifts are creating a need for budget-friendly family recreational activities. Fifty percent of existing millennial campers say that having children and increased spending power has made them want to camp more often. Couples with kids surveyed were more likely than any other demographic to take 3+ camping trips per year, and significantly more likely to report intending to spend more nights camping in 2019.
Another force driving the growth of camping among millennials is the popularization of new accompanying experiences that offer greater comfort and amenities. These can help mitigate challenges like finding a campsite, dealing with bugs, and safety. They can also make a campsite more family friendly, with additions like basketball courts, themed weekends, satellite TV, and full-featured bathrooms.
Of the 1.4M households that began camping for the first time in 2018, almost 60% preferred cabins, recreational vehicles, and other “glamping” amenities to sleeping in tents.
Finally, technology is helping millennials learn more about camping and find camping experiences.
Virtually all campers reported bringing their some kind of tech device with them camping, primarily in case of emergencies or to research safety issues. Online platforms like Hipcamp and Campsy have emerged to help campers book unique lodging experiences like yurts, treehouses, and caves.
Social media is also helping campers discover new places to visit, then share their experiences with others: 30% of millennials said that they picked a camping spot after seeing someone else go there.
New technology, the rise of high-end camping, and millennials’ emerging roles as parents and full-fledged earners are changing camping. Once a niche form of relatively inaccessible outdoor recreation, camping now more closely resembles an alternative travel industry, with a range of lodging and experience options. Most importantly, it is an even more kid- and family-friendly activity than it once was — essential for the generation that now makes up the majority of new parents in the US.
BOUTIQUE GYMS & CLASSES ARE spreading AS MILLENNIALS SEEK CHOICE AND COMMUNITY
Few industries will benefit as directly from the rise of millennials’ economic power as the fitness industry.
Generation Y is already more motivated to stay in shape than previous generations: over three-quarters of millennials (76%) exercise at least once a week , compared to 70% of Gen Xers and 64% of baby boomers.
Millennials are also much bigger spenders when it comes to gym memberships, dropping almost $7B annually — double the amount spent by Gen Xers and boomers.
Source: Bruce Mars/Pexels
Millennials also differ in terms of how they spend on fitness, tending to steer clear of traditional full-service gyms like Gold’s Gym or LA Fitness. In fact, despite Generation Y’s enthusiasm for exercise, mid-market fitness clubs have actually seen their memberships stagnate over the years.
Instead, the fitness industry is seeing growth at the ends of the spectrum: budget gyms and boutique studios.
The number of people who joined a budget gym — fitness clubs that charge members $20 per month or less, such as Planet Fitness — increased by almost 70% in 2015 alone, according to IHRSA. The gyms offer a wide variety of amenities, often including classes, at a fraction of the cost of a traditional mid-market gym membership.
At the same time, boutique studio memberships grew by 70% between 2012 and 2015, with memberships hitting an all-time high in 2016. The customers at these boutique studios — including places like SoulCycle, Rumble, and Pure Barre — are firmly in the millennial camp, averaging 18 to 25 years old, according to IHRSA. Expenses at these boutiques can run high, with a single class at boxing gym Rumble costing more than $30.
Millennials’ willingness to pay up, despite their unique financial pressures, may be partially driven by their tendency to view exercise as a social group activity rather than an individual one. One 2014 survey found that 63% of people who attended boutique studio gyms did so because of the “community aspect formed by other people attending,” with another 47% attributing their attendance to the atmosphere.
This community aspect could help studio gyms earn the loyalty of millennials customers. Gym-goers who feel connected to a particular club or class are more likely to stick around as members.
To attract millennial clients, some old-school gyms are adapting their models to capitalize on the increasing popularity of the boutique studios. In 2017, Gold’s Gym debuted a series of “coach-led, community-driven and individually adapted boutique-style classes” under the Gold’s Studio moniker, which went live in 40 of its 700+ locations.
While millennials are more eager to exercise — and more willing to pay for it — than any generation that came before them, it’s unclear what fitness industry players will come out on top as Gen Y enters its spending prime.
US health clubs have already rushed to capitalize on millennials’ devotion to self-improvement, with the volume of US health clubs increasing by 20% between 2011 and 2015. But it remains to be seen whether this expansion will ultimately look like a bubble, as the trendy nature of many health clubs may make them just as susceptible to turnover as traditional gyms, if not more.
What does seem certain, given millennials’ proclivity for health and working out, is that the fitness industry’s growth shows no compelling signs of slowing down.
MILLENNIALS ARE SEEKING OUT MORE AFFORDABLE, BESPOKE TRAVEL ARRANGEMENTS
With an appetite for meaningful travel experiences and access to new online platforms that make customized travel easy, millennial travelers are looking to cut out middlemen and invest in their own bespoke travel experiences — without paying a higher cost.
This has triggered a reorganization of priorities for an industry that has long focused primarily on appealing to baby boomers, a retired and relatively deep-pocketed demographic with plenty of free time. However, millennial consumers have proven just as keen to see the world as their parents and grandparents.
An Airbnb study from 2016 showed that many millennials prioritize saving for their next trip over paying off debts or saving to purchase their first home. Another found that 21% of millennials would accept a lower salary if it meant they could travel more frequently. The majority of Generation Y would even be willing to sacrifice their Netflix subscription, coffee, alcohol, carbs, and even sex in favor of traveling, according to Forbes.
But while millennials are just as eager to see the world as older travelers, their tastes are markedly different, and traditional vacation packages are unlikely to meet their high expectations. Many are turning their backs on traditional guided sightseeing tours and bus excursions in favor of more authentic travel experiences.
“Destinations need to improve their experiential offering. Traditional attractions and old buildings and churches do not suffice anymore. Music festivals, cultural and culinary events, multi-day dance parties and artistic happenings all must be on the menu of destinations looking to attract more millennials.“
— Michel Karam, founder and CEO, müvTravel
Traveling millennials want to find hidden gems and local favorites that capture the true essence of a destination. Services like Airbnb and VRBO directly appeal to this, eschewing traditional hotels to allow tourists to live like locals.
At the same time, millennials are also demanding when it comes to price. The ubiquity of price-comparison apps and the convenience of e-commerce are making it easier than ever for frugal millennial travelers to find great deals, and 85% of millennial travelers check multiple sites before making a commitment.
As with many industries in today’s information economy, millennial travel trends are strongly influenced by social media. Research finds that 87% of millennials on Facebook use the site for travel inspiration, making it the most influential social media platform for Generation Y travelers thinking about their next trip. In addition, 82% of millennial travelers said they considered user reviews an important factor when planning a trip, and 76% decided upon a destination based on the recommendation of a family member or friend.
While the combination of millennials’ high expectations, budget-conscious mindset, and desire for authentic experiences poses unique challenges to traditional travel businesses, it also means greater opportunities for companies ready to cater to Generation Y’s discerning tastes.
As fastidious planners and price-conscious consumers, Gen Y travelers are likely to prefer third-party platforms and marketplaces where they can more precisely customize their experience. Chain hotels looking to regain market share lost to emerging accommodation marketplaces will need to either embrace this millennial preference or find another way to attract millennials back to their businesses.
In 2018, Marriott International opened a hotel designed specifically for young travelers in Tampa, while Hilton began building a new iteration of its millennial concept hotel, Tru, in Baltimore. The relatively small, stylized rooms at Tru cost less than $100 a night and feature a smartphone-powered check-in system, designed for affordability and efficiency.
At Hyatt Centric — a Hyatt concept designed for millennials — staffers are encouraged to share recommendations with guests, and guides to local breweries and restaurants are placed in rooms. Meanwhile, Residence Inn Marriott locations host weekly mixers designed to give millennial travelers social get-togethers that bring them closer to the local flavor of their destination.
For the old guard of the travel industry, attracting millennials by building out better technology, service, and affordability is an existential requirement. As Smashotels President and CEO Scott Greenberg put it:
“If we attract young people, old people will show up. But if you build a hotel for old people, young people never show up.”
4. Fast casual dining
MILLENNIALS opt FOR SPEED, SELECTION, AND VARIETY WHEN THEY EAT OUT
Problems in the casual dining industry came to a head in 2017, as popular chains like TGI Fridays and Applebee’s were forced to shutter dozens of locations amid slumping sales and lower traffic. The primary culprit, according to analysts, was millennials — a generation that allegedly no longer goes out to eat, preferring to cook or order take-out.
The reality is that casual dining chain sales are down among all demographics, not just millennials. Millennials are not avoiding restaurants — in fact, no generation has a higher percentage of frequent restaurant visits. And their restaurant usage is growing, with millennials with children making 5% more visits to restaurants in 2018 than they did in 2017, according to The NPD Group.
What’s changing is that millennials are turning away from old-school chain restaurants and embracing new fast casual dining concepts.
Millennials are price-sensitive and eager for healthy, fresh food options, and they crave choice in their restaurant experiences. Almost 40% of millennials eat meals on the go, compared to 26% of Gen Xers and 19% of Baby Boomers, according to a Technomic research study, and more than 50% want a “good deal for their money.”
Fast casual restaurants from Chipotle and Subway to Shake Shack and Five Guys are largely designed with these preferences in mind, with fast ordering and app-powered pickup and delivery as basic pillars of their model. Fast casual dining also has an average check size around $9-$14, compared to less than $9 for fast food and as much as $20-$50 for higher-end casual dining. This gives millennials a dining option that doesn’t sacrifice too much quality for affordability.
The fast casual industry has also seen a wide proliferation of varied cuisines and tastes. From the successful vegan outlet By Chloe to the plant-based sandwiches at Next Level Burger to the sushi kiosks of Miso Ko, there’s a fast casual option for virtually any set of dietary restrictions and ethical choices.
Traditional dining and fast food chains looking to update their offerings for Generation Y need to consider not just their prices and menus, but also how they can integrate with technology, the degree of personalization they offer in their meals, and their approach to health.
Chipotle pioneered the trend towards the fully customized fast casual meal with its made-to-order burritos and bowls. Chains like Blaze Pizza are following behind: at Blaze, customers can fully customize their pizza and have it cooked in front of them in just 3 minutes.
As consumer food preferences evlove, Fatburger experimented with offering a plant-based burger in 2018 and found millennial customers were willing to pay more for the higher quality product. Other chains have also been quick to respond to heightened interest in plant-based meat alternatives. Burger King, Cheesecake Factory, Red Robin, and Qdoba are just some of the nationwide chains that have introduced plant-based meat products from Impossible Foods. Similarly, chains including Carl’s Jr., Dunkin, and TGI Fridays have all begun serving meat-free alternatives from Beyond Meat.
Technology also plays an important role in the fast-casual industry. Twenty-five percent of fast casual diners say that technology options are an important factor in their choice of restaurant, according to the National Restaurant Association.
From Starbucks to Panera, chains are embracing mobile ordering and in-store pickup to attract a busier, millennial audience. Self-service kiosks, like those at Subway and McDonald’s, are beginning to emerge at fast casual locations as well, and CEO of Capriotti’s Sandwich Shop Ashely Morris predicts widescale adoption of such technology in the front- and back-of-house in the long term.
However, more traditional casual dining may get a boost as more millennials have children. Designed for longer, sit-down meals rather than grab-and-go cuisine, these kinds of restaurants serve the need for a “third space” restaurant — a place where parents can go with kids to unwind without being hurried out the door.
A challenge for the fast casual dining restaurants of tomorrow will be building establishments that can be equally family and kid-friendly without sacrificing the key factors that make them appealing to millennials today.
MILLENNIALS LOVE COFFEE — AND THEY’RE WILLING TO PAY MORE FOR GOURMET PRODUCTS
Like Generation X and the baby boomers before them, millennials drink a lot of coffee. They also started drinking coffee much younger — on average, around 15 years old. After several years of declining sales among most age groups, millennial consumers are the vanguard of a resurgence in the coffee industry. Today they account for approximately 44% of the demand for coffee in the US.
But while millennials’ coffee consumption isn’t slowing, it is changing.
Instead of store-bought and pre-packaged coffee, millennials are seeking out cold brew and other specially prepared beverages, as well as ethically sourced, sustainable, and gourmet products.
Many millennial consumers are looking beyond older, legacy coffee brands to blends from boutique “third-wave” coffee roasters. Recent data shows that 70% of past-day coffee consumed by millennials is considered “gourmet.”
Millennials are also gravitating away from hot coffee toward canned cold brew and nitrogen-infused beverages. The can form is convenient for an on-the-go consumer, while different flavors and styles offer a range of options for choosy customers.
Environmentally conscious millennials are also taking a much more active interest in how and where their coffee is grown, and that’s influencing their buying decisions. Many Gen Y consumers are at least somewhat knowledgeable about their coffee, favoring brands committed to fair trade and environmentally sustainable growing practices.
Millennials’ love of coffee is a positive sign for coffee growers and brewers. Demand for premium coffee is unlikely to diminish in the near future, creating favorable market conditions for incumbents and new entrants alike. However, millennial preferences won’t put up with generic products.
With the ever-increasing amount of choice in the coffee space, manufacturers need to look to differentiate their offerings if they want to attract millennial attention — and they have a wide range of strategies to do so, from adding additional caffeine, promoting ethical or sustainable sourcing, or even experimenting with new ingredients like protein powder, nootropics, or CBD.
6. Frozen foods
CONVENIENCE-SEEKING MILLENNIALS ARE DRIVING A RENAISSANCE IN THE FROZEN AISLE
The frozen food sector, which could be worth as much as $290B globally by 2021, has long had something of an image problem. Frozen foods might be convenient, but until recently, they were not typically associated with healthy eating or seen as a desirable alternative to freshly prepared meals.
Gen Y may be changing that.
Millennials’ changing preferences around food and health are resulting in a renaissance of frozen foods, a resurgence in sales, and the emergence of new startups creating and delivering bespoke frozen meals. In 2017, millennials spent an average of 9% more on frozen foods per trip to the grocery store than households of other demographics. In 2018, the total volume of frozen foods sold in the US increased for the first time in 5 years, driven largely by millennials and consumers with children.
Several factors are driving millennials’ interest in frozen foods. Gen Y has a professed appreciation for convenience and eating on the go, and frozen foods can be a convenient, fast, and affordable alternative to ordering delivery or going out to eat.
Economic factors may also be contributing to this shift. For millennials burdened with stagnating wages and significant student loan debt, affordable frozen foods are becoming increasingly appealing.
“Something as simple as buying frozen food is really just symptomatic of the trends we’re seeing at large. When you’re seeing $400 dollars come out of each paycheck to pay a student loan, that’s certainly going to impact your ability to go grocery shopping in a way that people more traditionally used to.”
— Allie Aguilera, Policy and Government Affairs Manager, Young Invincibles
Another factor at play is the surge in the availability of healthy frozen foods. Traditional frozen food options haven’t been highly diverse or healthy in their offerings. There has, however, been a 600% increase in the number of Americans identifying as vegan in the past 3 years alone — and frozen food manufacturers are racing to capitalize on the popularity of plant-based diets among millennials. Fifty-two percent of millennials prefer organic food, and a massive 40% are eating a plant-based diet.
Source: Wikimedia Commons
Plant-based brands such as Gardein (owned by Pinnacle Foods, which also owns the popular Birds Eye frozen food brand), Daiya (acquired by Japanese pharmaceutical concern Otsuka Pharmaceutical in 2017), and Sweet Earth (owned by Nestle) have all made significant gains in the frozen food market in recent years — and the trend shows no sign of stopping.
Sales of plant-based meat substitutes alone increased by 23% from 2017 to 2018, with frozen plant-based convenience foods proving especially popular in the West South Central region of the US, according to the Good Food Institute.
Millennial consumers also expect frozen foods to be higher quality than they were in the past. Conagra Brands, which owns the Banquet brand of frozen ready meals, doubled down on product quality following a management shake-up in 2015 to meet heightened consumer expectations.
Other brands have emerged to capitalize on the gourmet frozen food trend, including Frozen Foodies, which offers cryogenically frozen meals prepared by professional chefs using gourmet ingredients. Daily Harvest offers a frozen smoothie and frozen bowl subscription delivery service and advertises heavily to millennials on Instagram, while Buttermilk focuses solely on pre-made Indian meals that can be reheated in the microwave at home and served immediately.
Wider selection, higher quality, and competitive pricing are all likely to drive frozen food sales in the near future. However, as consumers’ expectations increase, so too will manufacturing costs. The biggest challenge legacy frozen food companies face isn’t convincing a new generation of consumers of the benefits of frozen food; it’s how to manufacture and price higher-quality products competitively without cutting too deeply into profit margins.
DITCHING SODA, MILLENNIALS SEEK A HEALTHIER FIZZ IN THEIR DRINKS
While many millennials have little appetite for sugary sodas, that doesn’t mean they aren’t looking for other convenient carbonated beverage options — and they’re finding them in seltzers and flavored sparkling waters.
Sales of sugary carbonated drinks have fallen steadily for several years, and although sales rebounded for some brands in 2018, many of the largest soda manufacturers have gone back to the drawing board as consumers turn toward healthier alternatives.
The beverage industry has been quick to respond to these trends. In recent years, the dramatic increase in seltzer’s popularity has sparked an arms race among major beverage manufacturers as they seek to shore up their losses on soda with sales of low-calorie carbonated drinks.
Several major drink manufacturers have diversified their product offerings to include flavored seltzers. Coca-Cola acquired Mexican seltzer brand Topo Chico, which has long been popular across the American Southwest, for $220M in 2017. Coca-Cola also offers sparkling-water beverages through its Dasani and Smartwater brands. PepsiCo owns Izze, a range of juice-seltzer blends, as well as Bubly and SodaStream.
In addition to major brands, dozens of smaller independent beverage companies have emerged to quench millennials’ thirst for flavored seltzers. Spindrift, which claims to be the first sparkling water in the US to be flavored exclusively using real fruit juice, has grown rapidly since its founding in 2010. The company achieved revenue growth of more than 1,000% over a 36-month period from 2016 to 2018.
Venture capitalists invested more than $152M in seltzer and sparkling water companies in 2018 alone — more than the sum invested in 2016 and 2017 combined.
New upstarts are taking advantage of this momentum, looking to capture the attention of millennials by adding new ingredients into the mix — most notably CBD (which was declared federally legal this year) and alcohol.
Recess, a CBD-infused seltzer brand, opened an online store to sell its hemp-infused CBD seltzer in early 2019. The product is marketed as a wellness aid, and also contains supplements like L-theanine, an amino acid found in tea leaves.
White Claw Hard Seltzer, meanwhile, produces a range of flavored 100-calorie alcoholic seltzers. During summer 2019, White Claw sales surpassed that of any craft beer except for Blue Moon. A Nielsen survey showed hard seltzer’s sales growth at 193% over 2018. Of all hard seltzers, White Claw represented more than half of total sales.
In light of falling revenues and the soda industry’s ongoing image crisis, big soda companies have had little choice but to respond to the rise of seltzer by diversifying their product range to include healthier options that align with younger consumers’ tastes. Many leading beverage companies, including Coca-Cola and PepsiCo, have adopted an acquisitive approach to product diversification with mostly positive results.
With its sparkling water business up 19% in 2018 alone, Coca-Cola is in an enviable position to leverage changing tastes in the beverage market — but even Coke cannot take its historical dominance for granted.
For established brands, the biggest challenge may not be catering to changing tastes, but reinventing themselves to capitalize on their strong brand recognition while moving away from product lines that have traditionally been perceived as unhealthy, including their core soda beverages.
WELLNESS-FOCUSED URBAN MILLENNIALS BRIGHTEN THEIR SURROUNDINGS with plants
In 2019, Bloomberg declared that plants had become the new children for Generation Y. The Washington Post went further still, saying that millennials were filling their homes — as well as the “void in their hearts” left by not having children or pets — with houseplants.
There are a couple of problems with this narrative. For one thing, millennial women accounted for 82% of all births in the United States in 2016. Meanwhile, 35% of all pet owners in the country are millennials, making them the largest pet-owning generation — so many millennials do have children, pets, or both. Moreover, there’s not much evidence that people see houseplants as substitutes for children or pets.
That said, plant sales are on the rise, increasing in the US by nearly 50% in the past 3 years to reach $1.7B, according to the National Gardening Association. The average household spend on indoor plants has also increased, growing from about $30 in 2016 to nearly $50 in 2018.
Forces behind this demand may include millennials’ interest in holistic wellness and proclivity for urban living, where the temporary nature of rentals often doesn’t allow more permanent changes to one’s housing. On the supply side, a range of new digitally native D2C plant brands have sprung up to offer an easier and more accessible houseplant buying experience.
Houseplants have become an integral part of many Gen Yer’s wellness and self-care routines. On social media, terms like “jungalow” — a portmanteau of “jungle” and “bungalow” — and “urban wilding” have become incredibly popular hashtags for stressed-out millennials hoping to create urban oases in their apartments.
D2C plant brand The Sill’s tagline, “Plants Make People Happy,” directly contextualizes houseplants as a form of self-care and wellness.
“They call us Generation Stress for a reason. We position plants and our brand as the break in all this. It’s the antidote to this unfortunate thing that our entire generation suffers from: anxiety. And plants really can be part of the cure.” — Eliza Blank, The Sill
Advocates regularly cite scientific studies showing houseplants can increase productivity, reduce stress, boost physical health, and improve air quality. While recent research shows that houseplants have a generally negligible effect on indoor air quality, the mood-changing effects of surrounding yourself with plants are real and clear.
Also important in the resurgent growth of the houseplant industry is the “youthification” of America’s urban areas. Millennials today have a preference for city living that eclipses that of baby boomers and Generation X at the same age, and tend to rent more than other generations: 74% of millennials live in rental properties, compared to 61% of early boomers in 1981 and 62% of Gen Xers in 2000.
While renting is more affordable, and makes city living more possible, it also makes it harder to personalize and customize a living space. Plants offer a low-cost, low-impact way to do this.
And as millennials seek out greenery to enhance their living spaces, retailers aren’t waiting passively for customers to come to them; instead, they’re adapting their offerings to reflect changing shopping habits among millennial consumers.
Direct-to-consumer houseplant companies like The Sill, Greenery NYC, and Bloomscape offer highly cultivated aesthetics designed to be found and shown off on social media. They also offer meticulous plant care instructions and prioritize online sales.
Several houseplant subscription services have emerged in recent years, including Click and Grow, Horti, and The Sill’s Plant Parent Club. Larger e-commerce platforms like Amazon and Etsy have also launched specialized marketplaces for houseplants. These services not only make cultivating and caring for houseplants easier for busy urban consumers, but also strongly align with broader e-commerce trends that are popular with millennials.
While these trends may threaten traditional garden retailers, some independent nurseries have adapted and found success with millennial shoppers. California’s Folia Collective, Sanso, and Peacock & Co. have attracted millennial shoppers by embracing the clean, angular aesthetics of companies like The Sill and focusing their sales on houseplants — appropriate for a generation that’s more likely to have space for indoor than outdoor plants.
By offering easily available, aesthetically clean, and lower-cost houseplants, plant retailers of all stripes can better appeal to wellness-minded and urban-dwelling millennials.
DRIVEN BY CONSCIOUS CONSUMERISM AND ONLINE-FIRST strategies, SMALLER COMPANIES GAIN GROUND ON LEGACY COMPETITION
Over the last several years, the cosmetics industry has seen strong growth, driven largely by millennial’s new discovery and purchasing behaviors and the rise of niche new brands catering to their preferences.
As of 2017, millennial shoppers were buying 25% more cosmetics than 2 years prior, and significantly more than baby boomers, with self-described “makeup enthusiasts” using 6 or more products each day, according to NPD.
The global cosmetics market was worth about $530B in 2017 and is expected to surpass $800B as soon as 2023. However, between 2010 and 2015, the 10 biggest cosmetics brands in the market lost 6% market share, according to a Deloitte study, while smaller brands grew their share by 5%.
At the root of this shift is the millennial generation’s changing preferences around how they find and choose skincare brands.
Millennials are 3x more likely than previous generations to research new brands and products using social media, and 37% more likely to trust a brand after coming across a sponsored post about it. Beauty videos in particular are on the rise: global views of beauty videos on YouTube increased by 60% to a total of 219B between 2016 and 2017.
This tendency to use social media to find products has spurred the growth of new online-first and D2C beauty brands like Glossier, which used Instagram as its primary marketing channel to surpass $100M in sales in 2018.
Meanwhile, brick-and-mortar companies like Ulta Beauty are embracing niche merchandising as a strategy to lure consumers. Ulta has worked with the Kardashians, became the exclusive retail partner of popular skincare brand Peach & Lily in early 2019, and recently announced that 1,200 Ulta Beauty stores will carry D2C company Madison Reed’s products. Ulta saw an average of 20% revenue growth each quarter for the last 3 years.
While millennials are generally price conscientious, 73% are willing to pay more for products that are sustainable (compared to 66% of average consumers), with a lack of testing on animals as their highest priority.
They also want to buy natural, high-quality products. Roughly half of millennials reported purchasing skincare products free from synthetic chemicals during the past year, while launches of vegan beauty products increased by 175% between 2013 and 2018, according to Mintel’s Global New Products Database (GNPD).
As the skincare market becomes more crowded than ever, it’s important for brands to build strong connections with their customers. Glossier, for example, is working on its own “social commerce” project designed to connect customers with the company and with each other. Building its own platform could help insure Glossier against the possibility of Instagram’s influence turning against it, while giving the brand a more direct relationship with customers.
Ultimately, while millennials are more conscientious consumers of skincare products than generations before them, that hasn’t slowed down their spending. Armed with the ability to easily research new skincare companies, and faced with a wider range of niche brands than ever, millennials are buying far more skincare products than any other generation.
It’s up to the skincare brands to now capture that attention, deliver products that match millennials’ preferences (such as sustainable practices and natural ingredients), and nurture that connection over the long term.
MILLENNIALS STILL WANT TO DRIVE — THEY JUST WANT CHEAPER, MORE EFFICIENT VEHICLES
Despite their concern for the environment and reputation as bicycle riders and public transportation commuters, a large portion of Generation Y is just as keen to get behind the wheel as their parents were. In terms of vehicle-miles traveled, millennials actually drive more (controlling for factors like marriage and urban living).
In Q1’18, millennials were responsible for all new-vehicle sales growth in the US — quite an accomplishment for what many in the industry described as the automotive sector’s “lost generation.”
“Millennials had all but been written off as a serious customer group in the auto industry. But data tells a much different story. The demographic is maturing and is now poised to be a driving force in automotive marketing.” — Marty Miller, Experian Automotive
However, millennials do differ in their preferences. While older cohorts may favor luxury vehicles, such as high-end sedans and SUVs, most millennial motorists prefer smaller, more efficient, and more affordable sedans. In a 2019 survey, 86% of younger millennials and Gen Z members said they would consider buying a sedan themselves when they buy a car.
Millennials also have a demonstrated preference for foreign-made vehicles. Of the 10 most popular vehicle brands among millennial consumers, only 3 are American. Japanese automakers Honda, Nissan, and Toyota — the 3 top-selling vehicle brands among millennial consumers — are routinely rated as among the most reliable vehicle brands in the world. In addition, their popularity as midrange brands means comparatively lower prices for newer vehicles.
Despite millennials’ auto preferences, many automakers are eliminating sedans from their lineup: Ford recently announced that it would discontinue 100% of the sedans in its lineup by the year 2020. General Motors and Fiat Chrysler are following suit.
To retain their competitiveness in the domestic market, American automakers will likely need to reverse the ongoing elimination of sedans from their lineups. While overall data shows that consumers are buying more trucks and crossover SUVs than sedans, that data doesn’t account for generations. While sales of compact SUVs and larger cars are up among Generation X and baby boomers, only 2 non-sedan cars were among the 10 most popular vehicles driven by millennials in 2018.
Volkswagen, Hyundai, Subaru, and Toyota are a few of the international car brands that released new sedans in 2019, catering largely to millennials looking for smaller, and in many cases, first vehicles.
Experts and analysts expect that sedans will continue to make up as much as 30% of the domestic vehicle market in years to come. So far, it appears that it’s primarily foreign automakers who are intent on capitalizing on this trend — and on the larger trend of millennials getting behind the wheel in larger numbers.
FOR URBAN MILLENNIALS, MICROMOBILITY WILL BE THE KEY TRANSIT CHOICE OF THE FUTURE
Gen Y has been pivotal in the trend of resurgence in America’s urban areas. Not only do they have a significant preference for city living, they are also 21% more likely to buy their homes near city centers than Gen Xers. For the cohorts aged 25-34 and 35-44, the critical factor in that decision is access to transit, according to a Journal of Regional Science study.
Given that millennials make up America’s largest-ever generation, that is positive news for the sector of the transportation industry most primed to capture the future urban market: micromobility.
Micromobility services — including ride-hailing platforms like Uber and Lyft, bike-share programs like New York City’s Citi Bike, and electric-scooter rental services like Bird and Lime — have grown rapidly in recent years. Today, there are more than 85,000 e-scooters available for rent in 100 cities across the US, with more than 38.5M trips made in 2018 alone. As a whole, the micromobility sector is expected to be worth up to $300B by 2030.
American cities in particular are ideal environments for micromobility startups. Roughly 60% of all trips made in the US are 5 miles or less, and e-scooters and e-bikes are much more efficient than driving for such short distances.
Uber has already noticed its shared e-bike platform Jump cannibalizing its ride-share business during peak hours:
Top users of services like Jump and Uber are also significantly less likely than other respondents to buy a new car, according to the Shared-Use Mobility Center:
Top automakers in America and around the world have begun working on their own micromobility projects to capture the demand for a more affordable, efficient form of transport, especially inside America’s urban cores.
GM has unveiled its own e-bike project, ARĪV, which is launching first in Germany, the Netherlands, and Belgium before shipping to customers in the United States.
In late 2018, Ford bought e-scooter company Spin for a reported $100M, and the company has been operating a docked bike-share program in San Francisco and the Bay Area since 2013.
Other legacy transportation companies trying to adapt to a micromobile world include BMW, which is building its own line of electric bikes and motorcycles; Harley-Davidson, which is building an electric motorbike; and Audi, which is building electric mountain bikes.
One of the keys to success with micromobility will be the ability to work with municipalities to bring scooters and bikes to the road in a sustainable manner. Although some municipalities have welcomed micromobility startups with open arms, some have been resistant to allowing them to operate within city limits.
The city of Santa Monica, California filed a criminal complaint against Bird after the company deployed its fleet of e-scooters in 2017, and city attorneys in San Francisco issued cease-and-desist letters to Bird and Lime in 2018, claiming the scooters were a public nuisance.
Several other cities across the US, including Nashville, San Antonio, and Seattle, have introduced legislation in recent years either restricting or outright banning micromobility startups from operating in those cities following complaints, accidents, and fatalities.
For micromobility companies looking to capitalize on millennial consumers, a key challenge will simply be figuring out how to operate in the urban geographic locations that the generation prefers.
12. Personal Finance
MILLENNIALS ARE INCREASINGLY TAKING CONTROL OF THEIR MONEY WITH APPS, NOT BANKS
Despite being saddled with the highest student loan debt of any generation and the fastest-rising cost of living in a decade, millennials are often characterized as being inept when it comes to their finances.
The reality, however, is that nearly half of millennial Americans are actively saving for emergencies, retirement, and even future homes. Despite lower earnings than Gen Xers or baby boomers had at their age, millennials are more likely to have savings goals, manage their debt better, and do a better job of sticking to their budgets.
Generation Y’s secret weapon when it comes to navigating budgeting, saving, investing and spending — even with depressed wages and a less-than-desirable job market — is technology.
Millennials are the vast majority of users of web and mobile personal finance apps, which are year by year becoming increasingly popular tools to help millennials better understand, organize, and improve their finances.
With more than half of American smartphone users using at least one full-service banking app and almost one-fifth using a standalone budgeting app, consumers across demographics are embracing fintech products — but Gen Y users rely on mobile banking and standalone budgeting apps more than their older counterparts. Personal budgeting apps are especially popular with millennials, with approximately 70% of the user base of these apps belonging to the millennial cohort.
One of the most popular verticals for personal finance tech is banking. In one survey, 71% of millennials said that they would rather go to the dentist than listen to what a bank has to tell them — a sentiment driven largely by poor customer service and poor technological integration.
That distaste has created a huge opportunity for digital-first challenger banks, 7 of which have already surpassed 1M accounts: Revolut, Chime, Nubank, Qapital, Monzo, N26 and Uala. CG42’s 2018 retail banking study predicted that the 10 largest banks would lose more than $340B in deposits to this upstart brand of competition over the next year alone.
Millennial adoption has also fueled the growth of robo-investment advisors like Betterment ($16.4B in assets under management), Wealthfront ($11B AUM), and Personal Capital ($8.5B AUM). Robinhood, a trading platform, was valued at $7B as of 2019. In 2015, it revealed that it had a user base of 80% millennials, with an average age of 26.
As the rapidly rising cost of living continues to squeeze already struggling millennials, it’s inevitable that demand for personal finance apps to help cash-strapped consumers make informed decisions will remain high.
To stay relevant, legacy financial institutions will need to offer mobile apps that are both technologically sophisticated and simple to use. These apps may utilize technologies like Face ID for quick login, offer integrations with the other financial products like Robinhood that millennials are using, and be built as consumer products first — not portals into a web interface from the 1990s.