The close link between demographic and economic trends is undeniable. As baby boomers make way for the new generation, the economy is stepping into a new era of consumer and business behaviour. The members of this new generation, born between the years 1980 and 2000, bring with them new attitudes, skills, expectations and technologies and are popularly referred to as millennials.
Often prompting an eye roll from the occasional middle-aged aunty or uncle, this word and the people it represents are rapidly becoming more important to the economy than ever before. A dream come true for marketers, millennials differ from their predecessors in terms of their casual attitude towards long term saving and frequent use of credit for consumption.
A quick look at India’s population pyramid explains the importance of understanding the tastes and preferences of millennials in order to run a successful business. A major chunk of India’s population consists of 15-39-year-olds that are expected to constitute at least 64% of India’s workforce by 2021.
According to a Morgan Stanley report of April 2017, India will have 410 million millennials, who will spend $330 billion annually, by 2020. That’s more than the total population of the US, and more than the total number of millennials (400 million) that China has today. It is not a herculean task to understand why economists and businesses want to get to know the new kids on the block.
India’s millennials were not only witness to the technological boom but were also right in time for India’s integration with the global economy. Their world has been characterised by exponential and unprecedented economic and technological growth. A spillover effect of this is that millennials have become accustomed to instant gratification. This greatly explains the popularity of social media platforms like Vine where creators upload videos in which the joke begins, develops and incites a laugh all within 6 short seconds.
Despite the tragic downfall of Vine, the demand for convenience and accessibility has percolated to other industries as well. With product reviews and unparalleled variety both in terms of price and quality at the fingertips of millennials, businesses are scrambling to adapt to the tastes and preferences of their new consumer base. An interactive user experience that is strongly rooted in technology along with an exceptionally responsive customer service platform has made its way to the list of business essentials.
In this new environment, the biggest commodity a business can provide is convenience. The success of “digital middlemen” like Ola, Uber, Swiggy, Zomato, Netflix, Amazon etc. hence should come as no surprise. The growing demand for convenience creates opportunities in practically every industry from frozen food to cosmetics to housing.
Obviously, the flip side of this would be the failure of those businesses that fail to adapt to the new environment. For instance, it is becoming increasingly unfeasible for smaller local vendors to compete with big box stores. Big Bazaar or Reliance Fresh are a one-stop shop for all your daily needs and more. Unfortunately, this means that things aren’t exactly looking up for the shop-owner across the street.
The convenience craze is also shifting consumption patterns from ownership to renting. Owning items is slowly becoming an anomaly whereas sharing is the new norm. Goldman Sachs reports that we are rapidly moving towards a “sharing economy”. In a survey conducted by PricewaterhouseCoopers, 57% of American millennials agree that frugality and ease of access now replace the stature of ownership. This adds to the numerous reasons why Ola and Uber have become industry giants. They provide the comfort of having a car without actually owning one.
The housing market in large metropolises has actually taken a hit due to this exact reason. These cities are magnets for working-class millennials who marry late; do not want large financial commitments and desire convenience above all else. This means smaller, cheaper flats with close proximity to office complexes or good public transport connectivity sell better than say, a large 4 bedroom apartment with a park view and a school within walking distance.
Above all else, millennials are intrinsically a socially and politically conscious generation. They care not just about the product but also about the company that manufactures it. How well the company treats its workers; whether the company sources its produce from local farmers or if the manufacturer uses environment-friendly methods of production all add to the value of the product for today’s consumers. Millennials, thus tend to be loyal to brands that portray a pro-social message and follow ethical business standards.
Traditional marketing techniques just don’t cut it anymore and businesses are stepping up their game. It is now commonplace for advertisements to have some sort of social message or a feel-good factor. However, simply making tear-provoking ads is not enough. From extensive market research, it is clear that millennials are willing to shell out more bucks for companies that care. Spending on CSR, now more than ever, isn’t a cost but rather an investment.
For example, American cosmetics and personal care company Lush charges a much higher rate than its competitors because it claims its products are not tested on animals and that all its employees are paid much more than the minimum wage. Despite their high prices, Lush’s sales tell us a story of success. The brand reported an impressive $530 million in sales in North America in 2017. While most up and coming e-commerce platforms are characterised by jaw-droppingly low prices, Lush’s marketing strategy has given it the ability to satisfy its customers while also overcharging them for basic hygiene products like soap and toothpaste.
Apart from being active seekers of convenience and social responsibility, what else can we say about millennials? A popular opinion amongst economists and industry experts is that 18 to 35-year-olds are more risk-averse than their parents. Maybe the fact that they came of age in the middle of one of the worst financial crisis the global economy has undergone has contributed to their fear of uncertainty.
Now, this means a lot of things for the future of the stock market but most importantly it means that the popularity of relatively safe financial outlays such as bonds, money market funds or other stable investments is rapidly increasing. It is difficult to generalise across an entire generation but trends seem to portray that given the choice between a smaller but assured return and an unforeseeable but possibly large return, millennials would choose the former. I wouldn’t go as far as to say that millennials will continue to sit out the bull market forever. However, it might take them some time to overcome the trauma inflicted by the Great Recession.
In conclusion, it is evident that the face of markets and the dynamics of supply and demand will never be the same again. Be that as it may, this is not the first time we are witnessing demographic, technological and economic trends move in unison. Within every couple of decades, the economy goes through an inevitable and important whirlwind change. The changes brought about by Millennials today are simply the spillover effects of the economic revolution we witnessed in 1991. Globalisation and integration with the world economy meant the West has had a significant impact on India’s youth. What this means for India’s economy is yet to be decided but remaining true to the Millennial in me, I remain optimistic.
By Shreya Roy