The majority of millennials have a strong desire for self-expression through selfies

The majority of millennials have a strong desire for self-expression through 'selfies'

Millennial consumers are coming of age, with UK forecasts suggesting their spending on fashion over the next five years will grow at double the rate of apparel spend overall. Which means retailers need to have a strong digital presence and sophisticated product delivery in order to benefit, according to new research.

Millennials (consumers aged 15-34 years old) currently make up the largest generation in the UK at around 26% of the population. And although their income and spending levels are lower than Generation X (those born between the early 1960s to the early 1980s) and Baby Boomers (born between 1946 and 1964), millennials are in the only generation that will grow in median income over the next five years (estimated at +16%).

As a result, analysts at Berstein Research expect millennials' spending on apparel to grow 20% over the next five years, close to double the growth rate of apparel spend overall.

Millennials, they add, are digital natives and demand immediacy; they rely heavily on the opinion of their peers, and are constantly searching for products that can create a photo-worthy moment for sharing with their friends. Millennials are the first generation to have grown up with the internet and smartphones, and are the first cohort where shopping online comes naturally to them.

So maybe it's not surprising that millennial consumers account for around 46% of apparel e-commerce, higher than their share of overall apparel, which stands at 32% in the UK.

With 79% of millennials using social media and many having a strong desire for self-expression and "sharing" their lives with peers through 'selfies', Bernstein believes retailers need a strong digital presence with sophisticated logistics to meet the age group's expectations.

Firstly, a seamless, omni-channel proposition is expected from clothing retailers, the analysts say, with online presence “a must”. Even when millennials make a final purchase in-store, digital still has a “major role” in securing the sale by facilitating "webrooming" (research-online, buy-offline) behaviour, they explain. 

“This means retailers should work toward a single view of inventory with sales and returns possible in any combination of in-store, online or multi-channel.”

Millennials also expect retailers to provide tailored content, such as product suggestions based on previous purchases made and products viewed (to facilitate faster product discovery), reminders for abandoned baskets, and storage of personal information for smoother customer journeys.

“Retailers that succeed in personalisation will be able to improve conversion, while those that don't will lose customers frustrated with the 'backwardness' of the platform,” the analysts say.

In addition, there is increasing pressure for greater speed and more options in terms of product delivery. This, Bernstein says, is likely to put increasing pressure on apparel retailers to shorten delivery windows and increase the number of delivery and return options, which could pressure e-commerce profitability.

What's more is that millennials' perception of a brand is no longer controlled by a company's marketing department, but by the online community. This will require retailers to have a social media presence that engages the age group and goes beyond traditional advertising once suitable for TV and print.

Finally, millennial consumers are demanding “fresh” products that have low cost-per-wear for their 'outfit of the day' (OOTD) photos, which are shared on social media. “Retailers will need to satisfy this demand through faster and more frequent collection turns, affordable price points to support the low usage of the items, and/or providing products that can be worn numerous times in different ways.” 

Winners

Those retailers expected to benefit most from the growing influence of this consumer group over the next five years are online retailer Asos and Inditex's Zara. Although Primark appeals to millennials' need for low prices, the value fashion retailer “can and should do more to build its digital presence, even if this does not come with e-commerce”.

While Swedish apparel giant H&M also has a strong appeal, the analysts believe the retailer's pricing structure will challenge the profitability of its e-commerce offering.

“In the next five years millennials will expand their influence and become the key consumers of our economies as they age into their prime earning and spending age,” the analyst says. “This customer set has different expectations and demands to prior generations, and retailers' ability to meet these will determine their long term prospects.”

Global growth

But it's not just the UK market that needs to make the most of millennials. According to research by The NPD Group, millennial consumers already represent the largest dollar segment of US jeans sales at 28% - and are showing a renewed interest in the sector. In the 12 months ending May 2015, overall dollar sales of jeans declined 5%, but among millennials (aged 18-34) were up 2%.

Indeed, millennials are also redefining outdoor apparel and accessories, industry experts revealed at the recent Outdoor Retailer (OR) Summer Market. According to Adidas Outdoor US director Greg Thomsen, millennial consumers want apparel that is super light and packable, and transitions from functional to an urban setting, such as packable hammocks.

And separate research from global information company The NPD Group shows millennials are "changing the game" for the US hosiery market, as young consumers now account for the lion's share of the segment's growth. The market, which includes sheer hosiery, tights, and socks, grew 3% to US$7.3bn in the 12 months ending May, with sales to millennials increasing by 12%.