How Millennials Will Shape Retail in 25 YearsJuly 31, 2014
CNBC.com | July 31, 2014 – Looking ahead 25 years, the majority of the country’s spending power will rest in the hands of millennials.
Just as the Great Depression shaped the spending habits of Americans who grew up during that era, experts predict members of this new-edition, penny-pinching generation will continue to be driven by deals.
As a result, Byron Carlock, PwC’s U.S. real estate practice leader, said retailers who offer a good value and cater to millennials’ tendency to live a “throwaway” lifestyle—including a penchant for fast, cheap fashion and low-price furniture they can throw away when they move—will thrive.
“The millennials are the cohort we have to watch,” Carlock said.
Dan Hurwitz, CEO of open-air shopping center owner DDR, said fast-fashion stores Zara and Forever 21 will continue to grow their footprints and be mainstays. He also predicted department stores that offer consumers good value will continue to outperform—including what he called a “deeply promotional” Macy’s; Nordstrom, which is expanding its off-price Rack division; and Neiman Marcus, which is growing its lower-priced Last Call division.
Experts have also pointed to the low-price Japanese label Uniqlo as an international brand with the potential to become a U.S. mainstay. The company’s CEO Tadashi Yanai said earlier this year that the brand would ultimately like to have chains of 100 stores on both coasts.
Steve Barr, PwC’s U.S. Retail and Consumer practice leader, said the off-price focus delivered by outlet centers will also be important to both shoppers and retailers, who use the stores as a way to attract new customers. Although some have criticized the segment’s vulnerability as it relates to the deep discounting seen at full-price retailers and the closer proximity of off-price stores, others view outlets as a destination and say they will continue to be relevant.
“The outlet channel is very profitable for many retailers, and I don’t see that changing any time soon,” Barr said.
But there’s one low-cost brand that DDR’s Hurwitz doesn’t expect to see at shopping centers in a quarter century: online behemoth Amazon, which he considers more of a technology and logistics company than a true retailer. Because the company is not a true merchant—meaning it doesn’t curate its merchandise—Hurwitz said he isn’t sure what the online retailer would even put in its stores.
Bryan Gildenberg, chief knowledge officer at Kantar Retail, sounded a similar note. He predicts consumers will expect physical stores in 2039 to have products that are much more tailored to their needs and preferences, as well as offer a particular viewpoint on the assortment and price of what they carry. Amazon, on the other hand, is a “point-of-view-free” platform.
“They struggle with categories where curation is an essential part of the selling process, like apparel,” Gildenberg said.
Growing purchasing power of Latinos
Another demographic shift that’s expected to mold the retail industry is the growing Latino population in the U.S., and in the long term their purchasing power will also increase. According to the U.S. Census Bureau, the number of Latinos is expected to reach nearly 130 million people in 2060, accounting for about 30 percent of the country’s population.
With the pipeline for new projects relatively dry, some developers are already capitalizing on this growth to recreate dying shopper centers. Virginia Morris, vice president of consumer insights and strategy at Daymon Worldwide, pointed to the redevelopment of malls in the Southwest as one example.
Real estate developer The Legaspi Company is one firm that has repositioned malls in this region to cater to the growing Latino population, by building malls that fuse the demographic’s culture—including performances by Latino singers—with shopping that includes traditional goods.
“It’s all about knowing who you’re trying to pull into your store and who you’re trying to have as your consumer,” Morris said.