Please ensure Javascript is enabled for purposes of website accessibility

Retailers Are Suffering Because People Want Less Stuff

By Daniel B. Kline - Updated May 31, 2017 at 2:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Catering to millennials could pay off for retailers.

While the internet deserves blame for the failure of some retailers and the struggles of others, that's not the only problem facing brick-and-mortar chains. Retailers must also deal with shoppers, especially younger ones, with different goals and dreams than the baby boomers upon whom many chains built their businesses. It's been said that millennials, perhaps as a reaction to their parents, have shown more interest in acquiring experiences rather than accumulating stuff.

That changes things dramatically for retailers built around servicing an acquisition economy. It's a trickle-down effect with long-reaching impact. For example, if millennial buyers choose to not put their money into buying big houses (or houses at all) they need less furniture and have less room for a whole lot of other stuff.

For a department store like Sears Holdings' (NASDAQ: SHLD) Sears or Kmart, that single decision to buy or rent a smaller place to live can affect sales in numerous ways. It means the chain sells less clothing, fewer lawnmowers, tools, grills, and so many other things. It's a generational behavior that's only a piece of the retail puzzle, but it's one that has been talked about for years, with new research showing that the idea of younger consumers prizing experiences over material goods is a real thing.

Young people take a selfie.

Younger shoppers have different desires than older ones. Image source: Getty Images.

How are younger buyers different?

A new report by GfK indicates that millennials believe that experiences are more important than possessions in greater numbers than older and younger generations. Millennials are roughly those ages 20-39.

In the May 2017 GFK report, whichwas written about by eMarketer, the research firm shared the results of a survey of internet users in the United States conducted in summer 2016. That survey showed that 59% of 20- to 29-year-olds and 57% of 30- to 39-year-olds agreed with the statement that "experiences are more important than possessions." That beat out 40- to 49-year-olds at 53%, and people 60 years and older, who agreed with the statement 53% of the time.

Is this actually happening?

It's important to note that saying you value experiences over material goods is not the same as actually spending your money to reflect that. There are however some signs -- beyond struggling retail chains -- that consumers are actually behaving this way.

"Only 9 percent of consumers plan to spend more in the next 12 months," according to a late April report from NPD. "But, when it comes to travel, 25 percent plan to spend more, a number that is even higher among those between 18 and 34 years of age. And, over 80 percent of consumers plan to travel more than 50 miles from home in the next 12 months."

Those numbers are further supported, according to NPD, by an increase in luggage sales, which grew 20% by units and 6% by dollars through the early part of the year.

What does this mean for retail?

A drop in spending could be another nail in the coffin for retail, but understanding what is happening creates opportunities. Aside from stocking luggage, retailers can think about how to either market experiences or turn their stores into them.

That's something that successful chains have already done. Costco (NASDAQ: COST), for example not only sells its members everything from vacations to theme park or event tickets, it has also made its stores experiences.

Of course, going to Costco and being surprised by a deal on K-cups or getting to try ostrich jerky is not the same as taking an African safari. Still, it's shopping as experience -- something to do beyond just buying stuff -- that may appeal to younger consumers.

Retailers can't magically become theme parks or easily put in a petting zoo full of pandas and unicorns. What they can do is work to subtly give their customers more experience-based options. That may be as simple as J.C. Penney revamping its salons or Best Buy making its stores more interactive. There's not any one answer, but it's clear that retailers need to focus on more than just how they compete with online retailers. They also need to consider what younger shoppers want and give them more of it.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.