Much ado has been made of the buying habits of millennials. The generation of Americans aged 18-35 now outnumber any other, with a population of over 83 billion, and their spending habits are influencing the national economy, supporting the rise of industries like social media, fast casual restaurants, and video streaming.
Young shoppers are especially important because they have the longest window as consumers ahead of them, and they are often early adopters of trends that become mainstream as their tastes tend to influence the rest of the country.
A new survey by investment research firm Piper Jaffray lists the favorite brands and products of the nation's newest consumer set and underscores some key trends for investors to watch. Let's take a look at a few of the big winners from the report.
1. Apparel
Over the 20th Century, the mantle of most popular teen clothing brand has passed from The Gap to Abercrombie & Fitch and then to its subsidiary brand Hollister, but for the past five years the No. 1 spot has been owned by sports giant Nike (NKE -0.36%). Trending with the popularity of "athleisure" in the general population, teens' preferences have transferred from west coast preppy brands to sports and performance brands. Thirty years after Nike broke through with the Air Jordan, it's as cool as ever among the teenage set.
27% of upper-income teens in the survey ranked Nike as their favorite clothing brand, up from 22% the prior year. No other brand made it into the double digits. Its leadership in footwear is even stronger as it rated 50% among the same demographic, the first brand to ever do so, up from 43% the year before.
2. Internet
Following its position with adults, Amazon.com (AMZN 1.49%) was the dominant website for teen shoppers, with 38% of respondents listing it as a preferred website, up from 32% the year before. Amazon Prime is also popular in teen households, with 47% penetration across all income levels, up from 43% in the spring. That high penetration rate speaks to the success of Amazon's big push to grow Prime membership in recent years.
In the social media space, Instagram remained at No. 1, with a 33% share while Facebook and Twitter are both declining. Facebook is now just the fourth-most popular social network with just 15% of market share, behind No. 2 Twitter with 20% and No. 3 Snapchat at 19%.
Facebook's tumble from over 40% three years ago to just 15% shows how fast trends can change in areas like social media. Though that shift also means that Facebook's purchase of Instagram may turn out to be its best strategic move.
3. Media
Perhaps the biggest victory in the survey went to Netflix (NFLX -0.08%), which ranked No. 1 in share of "time spent watching media" with 38%, topping cable TV at 29% and YouTube with 21%. Teens also said that only 60% of the time they watched TV shows, they did so on a traditional TV, and more than 40% said they don't need cable TV.
Those trends are consistent with Netflix CEO Reed Hastings' prediction that Internet TV will grow every year for the next 10 to 20 years, while linear TV will decline, as his streaming service is especially popular with younger people who are not as accustomed to traditional TV. As a further sign of its leadership, no other streaming platform approached Netflix's dominance, as Hulu garnered only 4% and other streaming platforms rated 8%.
Forever young
Amazon CEO Jeff Bezos once said, "All businesses need to be young forever. If you age with your customer, you're Woolworth's." Investing in the future and creating a young customer base is one of the best ways for a company to build value and ensure growth, and Amazon and Netflix have proven themselves to be masters at it, continually reinventing their businesses and pioneering new industries. Netflix has transitioned from a DVD-by-mail service into the leading streaming provider, becoming a force in original programming along the way. Amazon, meanwhile, has continued to make its Prime service more attractive with additional benefits and has developed leading positions in industries like cloud computing and e-books. That ability to create the future shows why both companies warrant such large valuations despite minimal profits.
Nike, though it's been around since the 70's, has managed to remain youthful by focusing on innovation with products like the FuelBand and Flyknit and a push toward 3D-printed sneakers. The results of the poll also show that Nike has retained its teen appeal despite the rise of competitors like Under Armour and Lululemon Athletica.
For all three companies, Amazon, Netflix, and Nike, their appeal with young people is among their greatest strengths, and that should continue to propel the stocks higher as those consumers enter their prime spending years.
