Will Millennials Stop Spending?

In a word, no. Or let me modify that, I don't think so. Millennials, like everyone, are feeling the pinch of a shrinking economy and collapsing financial markets. Yet there are indications Millennials may not be pulling back to the same degree as everyone else. Individually, none of these indications would be definitive. Together, they suggest Millennials will keep spending:

Our focus group research last week suggests they are still interested in imported beer.

An Ad Age-commissioned survey (1.19.09) shows younger coffee drinkers are the least likely to report they are cutting back on expensive lattes. "Those who have scaled back the most since the beginning of the year...are consumers 45 to 54, with fully half (50.4%) saying they have "cut back a lot" on fancy or expensive takeout coffee. That was followed by consumers 35 to 44 (37.5%) and 25 to 34 (33.3%)."

This week BIGresearch predicted Millennial-favorite retailers Aeropostale, Hot Topic and Buckle "are almost certain to see an increase" in sales in 2009, based on indications from their survey panel. (Wal-mart and Fred's were the only other retailers in this category.)

What's going on? My guess is that Millennials are already accustomed to thinking of themselves as cash strapped, so the crisis is unlikely to bring any real change in behavior. Every college student I know is convinced he is 'poor'. Recent grads feel burdened by (very real) college debt and young marrieds/parents are chronically short of cash. This is good news for Millennial marketers who have long understood that 'luxury' is not a word designed to appeal to the Millennial mindset. Millennials always think of themselves as 'value' shoppers, even as they opt for expensive brand-name apparel and electronics. Apple will continue to thrive, despite the fact that a $649 Dell provides the same functionality as a MacBook at twice the price.

Judy Hopelain, describes in her blog, Retail Hits and Misses, her experience shopping for a formal dress with her 16-year old daughter. I think it perfectly captures the Millennial mindset, spend carefully, but spend!

There were deals to be had. We started out at Bloomingdale’s and after trying on a dozen or so dresses, found one by French Connection she loved but was a size too small, and had them hold 3 others while we went to look elsewhere. She was concerned that someone else would show up in the BCBG dress she put on hold. A group of 15 girls all agreed to post pictures of their dresses on Facebook to prevent duplicates (GREAT IDEA!), but the whole school is not part of the plan, so she couldn’t be sure. BCBG seems to be the favorite of high school juniors and seniors, and apparently two girls wore the same BCBG dress last year. The horror! So, we worked our way through the mall. The favorite dress on hold at Bloomies was on sale at the BCBG boutique for 30% off – and the store was filled with girls from our high school. So, despite the discount, which put the dress closer to the price I had in mind, the dress was off the list. The whole brand was out. We ended up finding a totally unique dress in a London boutique called Reiss – no way would anyone else have that dress. It was marked down 75%, which put the dress comfortably in our price range. So, we bought it, and a great looking pair of sandals to go with. Later, at home she went online and found her size in one of the dresses she’d tried on at Bloomingdale’s that was a size too small at LolaBoutique.com. What to do? Like lots of people, we are cutting back and watching our spending. She came up with the plan – return the sandals since she realized she already had shoes to go with either dress. Return the dress to Reiss. And since the dress online was still slightly over the price I had in mind, have her pay the difference. Oh, and let her run around and handle the returns herself.

What Millennials Will Be Talking About at Thanksgiving

Millennials across the country will be returning home for Thanksgiving. What will they be talking about other than the pie? I strongly suspect the economic crisis will be at the top of the list. For those in college, there will be some anxious discussion of whether it will be possible to stay there. For those out of college, jobs will be top of mind. We just completed a series of focus groups among Notre Dame students and recent alumni about their lives post-graduation. While they are overall optimistic about their future, they have immediate worries about getting a job, keeping a job, or changing jobs, depending on where they are in their career. They yearn to be independent, and want the freedom to make good choices based on what they really want to do, not ones dictated by a poor economy. Many are struggling to pay back loans.

Jessica: "My loan payment is about a quarter of my income each month, it's constantly hanging over my head."

Gwen: "I worry that I'll never go back to school and I want to."

Laura P. "More generally, my biggest worry the economy and job stuff. I feel okay about our mortgage and student loans as long as our jobs remain stable."

Chad: "If I didn't do what I do, i wouldn't be able to pay my debt. And I hate that fact."

Traditional Thanksgiving conversations about 'What would you like for Christmas?' will give way to 'How can we moderate our Christmas spending and still make it feel like Christmas?' Millennials tell us they are finding small ways to save -- eating out less often, forgoing a cell phone upgrade, drinking fewer lattes, taking fewer trips. One Millennial I know has given up his car in favor of Zipcars. But they are still having trouble making ends meet. A study from the American Savings Education Council (ASEC) and AARP shows that 91% of young adults report having financial goals for themselves, only 53% report sticking to a monthly budget. 61% feel their retirement savings is behind schedule. 42% of these young adults give themselves a grade of D or F to describe how well they are saving. Cash in a stocking is likely to be a common request.

Millennials' Biggest Issue and What It Means

What is the most important national issue for Millennials? Harvard Institute of Politics posed this open-ended question in its 15th annual poll among 2,400 18-24 year olds in September/October 2007 and again in 2008. (Thank you! John Della Volpe at Social Sphere for sending this!) The answer (see chart) is the state of the economy (53%). The economy trumps the war (9%) and healthcare (5%) by a wide margin. This is not a surprise, given that the poll was conducting during the financial crisis and two economy-focused presidential debates. The surprise is how different things looked a year ago, when the war was the top issue and the economy was mentioned by only 5%. Admittedly, my priorities have shifted a bit as well, so this is not solely a Millennial phenomenon. But it's interesting to explore how this new awareness is affecting Gen Y, beyond the presidential election. In this regard, nothing has really changed: according to the poll, 18-24 year olds choices are pretty pretty much the same as they were before crisis.

I have firsthand evidence they are thinking about the crisis. I asked a young man I met in the Dallas airport last week who attends Farragut HS in St. Petersburg whether they were discussing the crisis in his economics class. He replied with a grin, "It's ALL we talk about."

My daughter who is a college freshman reports her friends are concerned about their parents ability to pay tuition and that scholarships and loan availability will be affected by the new economic reality.

On the job front, business schools are reporting an uptick in enrollment. According to a report, Grads Fear Gloomy Job Prospects, by Medill at Northwestern, there is additional pressure on students college career centers . (Check out the great video of students across the country talking about their job prospects). We are about to conduct a series of focus groups among recent alumni on behalf of Notre Dame's Alumni Services; I expect to hear there is extra pressure on young employees to perform, making the already stressful transition from college to work even more taxing.

Here are some other predictions:

High school students will begin to defer going to college in favor of jobs or to wait until older siblings have graduated. Applications may be down this year for the first time in many years, despite the demographic bulge for the class of 2013. Others who normally would go for a 4-year school will opt for community college.

We will see parents become even more important to young graduates. Already 50% of men and 33% of women 18-29 live with their parents. Look for this to increase, with no increase in raised eyebrows.

We may even be relieved from hearing more whining about Millennials' unrealistic workplace expectations over the next few years.

Finally, Millennials' civic mindedness may also combine with necessity to drive more to public service. Many may prefer underemployment that helps 'make a difference' to unemployment. The Harvard Institute poll I referenced earlier confirms other studies in this regard, and goes on to specifically outline what they might do to serve:

"Three-in-five (59%) of America’s youngest citizens (18-24 year olds) say that they are personally interested in engaging in some form of public service to help the country -- 19 percent very interested....In addition, the subgroups that seem most intense in their interest to engage in national service are African Americans (25% very interested) and Hispanics (24% very interested). Among the 59 percent who say that they are interested, following are the ways in which they would consider engaging: • 75 percent, part time in their community • 47 percent, work for the federal, state or local government • 32 percent, use the Internet to collaborate with government • 32 percent, get involved in a political campaign • 25 percent, join the foreign service • 23 percent, join national service program full-time like Teach for America or City Year • 17 percent join the military, and • 17 percent run for political office.

Those are some impressive figures. If Millennials follow through, there could be a silver lining to the crisis after all.