If you're trying to make money off of where millennials spend their time and money, you'll want to check out Amazon.com (NASDAQ:AMZN), PayPal Holdings (NASDAQ:PYPL), and Activision Blizzard (NASDAQ:ATVI). Each is positioned in a sweet spot of megatrends influencing where this younger generation is spending its time and money.
Amazon is a leader in offering two things that young shoppers identify as important: fast delivery and free shipping (we're a cheap, impatient bunch).
Amazon also provides a wide selection of what millennials spend the most money on when shopping online: clothes. Slice Intelligence, which tracks actual receipts from online retailers, found that Amazon captures the most apparel spending from millennials among online retailers. Amazon dominates with 16.6% share of millennials who buy clothes online. The other retailers on the list -- including major brands Nordstrom's, L Brands' Victoria's Secret, and Gap -- all have less than half of Amazon's share.
Amazon may be getting ready to dominate grocery sales to millennials as well, following its acquisition of Whole Foods Market. According to the Organic Trade Association, millennials with children are the biggest group of organic-food buyers in America. According to the group, "a greater percentage of Millennials said buying organic is a key eco-conscious habit than any other generational group."
Amazon is planning to help Whole Foods get more competitive by lowering prices and offering special deals for Amazon Prime subscribers in Whole Foods stores. Whole Foods is also partnered with Instacart, an app that provides home delivery in certain areas, which certainly takes care of the fast delivery part of the equation for younger shoppers.
Amazon is also making money off millennials via its 2014 acquisition of Twitch, which provides game streaming. About 10 million people every day tune in to Twitch.tv to watch others play games. Game streaming is also known as the game video content market, which generated $4.6 billion in revenue last year, and Twitch captured the largest share of that amount.
Millennials pay for things in different ways than their elders and when you think about digital payments, you'll want to think about PayPal, which is spreading its strength via partnerships with credit card brands and banks. One of the best things going for PayPal in the millennial market is Venmo, a peer-to-peer payment app that is becoming well-used among younger generations. Venmo lets you set up and fund an account and then you use that account to pay (and receive payment from) friends. For instance, you can pay back a friend who covered your portion of the lunch bill or your roommate can you send you their half of the rent after you write the check to your landlord. "At its core, Venmo provides a social way to pay your friends when you owe them money and don't want to deal with cash," says the company. You can also use your Venmo account to make purchases from authorized partner apps.
Venmo's total payment volume has been consistently growing more than 100% year over year. The service processed $8 billion in payment volume in the second quarter, which is up from Q1's $6.8 billion.
There are other peer-to-peer payment services out there, with Apple's upcoming Apple Pay Cash feature as the one getting a lot of attention. The main differentiator for Venmo is that it's not just a payment service, but also a social network. When someone pays for something, for example, it goes to their feed in the app, where maybe they will recommend what they just paid for. This is an appealing feature for merchants, and should help Venmo continue its momentum as PayPal expands the service throughout its merchant base. lululemon athletica and Forever 21 are among the most recent merchants to offer the ability to pay with Venmo.
Millennials have grown up in a digital age, with video games being one of the top forms of entertainment appealing to the younger generation.
My favorite video game stock is Activision Blizzard. It has its tentacles reaching into several growth opportunities impacting the industry right now, including in-game advertising, consumer products, movies, and esports. Activision is home to some of the most popular games in the industry, including Overwatch, Hearthstone, World of Warcraft, and Call of Duty. Altogether, these games helped the company generate $6.9 billion in revenue over the past year. Activision has grown earnings 18% per year over the past five years, and, given the opportunities mentioned above, it has plenty of tailwinds to keep the momentum going over the next five years.
The 83 million U.S. millennials are having a big impact on how business is done. These three companies give investors a way to capitalize on the trends.