For longer than most of us can remember, the success of U.S. business has been driven by the homogeneity of the population — either how it looked (mainly Caucasian) or what it wanted (similar aspirations). However, as we look ahead, that will not be the future.
Not so long ago, the United States was predominantly a country of white, Anglo-Saxon, Protestant, middle-class, suburban households, with two adults, two children and a pet. That configuration drove the growth of many of today’s iconic retailers and brands. Everyone aspired to basically the same thing. “One size fits all” enabled the growth of big retailers and big brands selling to large, singular segments of the population.
Now, we are different. The American populace no longer looks like and lives like it did in the 1950s and ’60s when most of today’s major retailers and brands were born.
It’s time to face reality: The face of the U.S. consumer and household has changed. In 2015, as the economy continues to improve and technology cements its role, the time is ripe for all to understand and take advantage of how the populace is changing.
In WSL Strategic Retail’s latest How America Shops study, “Population Shakeup — Reshaping Retail,” a national quantified survey of 1,500 women and men, we looked at the shakeup: the influence of generations; household configuration; income; ethnicity; urban, suburban and rural communities; and more.
New prototypical American household
Perhaps the biggest shakeup of all is the changing configuration of the average American household.
Consider what it means when only one-third of U.S. households have children under age 18 in them, and one-quarter of households comprise only a single person, and seven out of 10 households now have only adults in them.
While the number of children under 18 (75 million today) will continue to increase in actual numbers, it represents a smaller and declining percentage of the population (23% today, down from 26% in 2000). And the prototypical household is now more likely to be Hispanic than Caucasian (25% today, 28% by 2025).
If ever there were indications that the shopping world needs to change, here they are.
Time for Hispanics is now
Based on our new study, Hispanics make more shopping trips in a week (3.6 versus 3.1 for the total population), shop in more stores (9.5 channels in three months versus 8.7), are more likely to browse (56% versus 46%), and see shopping as a social outing with others (50% versus 38%).
They work harder than any other ethnic group at finding the lowest prices. That translates to their choosing retailers who carry private label products they trust (71% versus 61%).
More shop online to get better promotions (52% versus 40%), and more use mobile phones in-store to get information and discounts (40% versus 32%). They have higher expectations for a wider selection of healthier products (68% versus 58%), and more demand information to help them choose (58% versus 48%).
In addition, today, one-quarter of Millennials (ages 20 to 33) are Hispanic, which further anticipates their influence on retail. Retailers and brands take note. Fast.
We can no longer depend on younger shoppers with lots of disposable income to bolster retail as companies have in the past. Today’s younger shoppers have many financial burdens, a frugal mind-set, and technology at their fingertips that enables them to be smarter and more circumspect about where and when they shop and the brands they buy.
In this research, we studied the new, youngest generation of shoppers, iGen (some call them Generation Z). The first wave of shoppers in this generation, ages 16 to 19, learned to take photos on an iPhone, studied the alphabet on Leap Frog and watch movies with the swipe of their hand.
Most are still students, but the shopping habits they’re forming are worrisome for brands and retailers. In some ways they are like their Millennial counterparts — for example, where they shop.
In other ways they’re quite different: They’re significantly more attached to their technology, in general, and as a facilitator of their shopping. More use technology to find the lowest prices (57% versus 41% of Millennials), and most browse online before they go to the store (53% versus 43%). They’re price conscious and less loyal to a single brand. They will be a challenge for retailers and brands in their shopping years ahead.
U.S. business so often loves to focus on the young. However, it’s important to note that more than four in 10 Americans are now 45 or older. That’s the generational squeeze companies will have to live with in the future because older shoppers simply shop less and younger shoppers look at bargain hunting as a form of gaming.
Suburban sprawl makes a U-turn
Remember the days when the suburbs were crowded with retail — the mall, the strip center, big-box retailers of all kinds, and the local Main Street with easy-to-access drug, specialty and grocery stores? The suburbs were where families and retailers went to grow. Not today.
While many retailers remain in the suburbs, many consumers do not. Three-quarters of U.S. urban metro markets have seen increased population in the last three years, according to the Census Bureau. Contrary to stereotype, in our research urban areas have more families with children than the suburbs (44% of households in urban areas versus 36% in the suburbs).
While some retailers are experimenting with smaller, urban formats, retailers in general have been way too slow acknowledging the shift to urban-esque shopping. For many retailers, city stores are filled with contradictions. Smaller spaces offer less variety for shoppers who want more. Retailers are expert at adding one more thing to the basket, but shoppers who are walking or busing to the store buy less.
Fortunately, technology can help retailers manage this by offering online ordering in-store and home delivery for bigger orders. But they need to get moving — especially as online retailers like Amazon and delivery services like Instacart make it easier for urban shoppers to get what they need within hours of ordering.
Income is less of a differentiator
Two-thirds of consumers now shop with a “middle-income mind-set.” We see that households with annual incomes from $50,000 to $150,000 are more similar than different, watching prices on everything, passing up a favorite brand in favor of an OK one, pre-shopping to choose where they will shop — usually based on what’s on sale.
The fact that those with mid-six-figure incomes think and act like middle-income households is a wake-up call, as is the price consciousness of all, especially younger shoppers (including iGen). It means that even as the economy improves, the perpetual search for low prices or “good enough” brands will continue, because it is now the accepted “middle class” mind-set.
Beware the ‘big picture’
Companies need to look beyond the mythology of the mid-20th century, when many of our current retailers and brands made their mark. Shopping and shoppers today may appear comfortably familiar to those of days gone by. But they are not. Caucasian moms, households with two parents and two children, 20-somethings. The affluent are no longer as relevant or opportunistic, and they will certainly not be five years from now.
The chain drug store opportunity
There are lots of opportunities and some real challenges. Opportunity: Single-person households and urban families will expect the convenience of small, local stores, like the local drug store. But those stores must match their unique needs, which are quite different.
A localized assortment and customized services (including in the pharmacy) become critical. The growing digitally precocious, price-conscious Hispanic population, especially in the cities, are another opportunity — but again, only if the drug store (real or virtual) reflects their specific needs and preferences.
Other chain drug opportunities include those age 45 and older, now 40% of the population. They have the most money to spend and are the most brand loyal, an increasing rarity in younger shoppers, especially Millennials and iGen who will challenge the retailer on price every day, as will Hispanic moms.
And the biggest challenge of all, as one of our dear retail clients said recently, “Localization by store, customization by individual is becoming more essential. But the complexity of that is a real challenge to retailers.”
Now, we are different. Are you ready?
Wendy Liebmann is chief executive officer of WSL Strategic Retail ([email protected]), a New York City-based global consultancy specializing in shopper insights and retail strategy, and publisher of “How America Shops.”