Goldman Sachs says millennials didn't inherit a spending habit companies have capitalized on for years
These spending habits continue to fascinate - and frustrate - retailers as 20- and 30-somethings defy the consumption patterns that previous generations followed for years. One major difference: Millennials are far less likely to buy something because it's convenient, something many companies capitalize on. Rather, they're focusing on value.
That's according to a recent episode of Goldman Sachs' "Exchanges at Goldman Sachs" podcast. Lindsay Drucker Mann of Goldman Sachs Research explains that millennials are willing to search for the lowest price on an item or patiently wait for the right deal to pop up. They're taking their time to contemplate each purchase, not just buying what's directly in front of them.
"We see areas where millennials are willing to spend, but overall, they're not levering themselves up to make their dollars go further; they're being much smarter and much more conservative about their balance sheets," Drucker Mann says.
She goes on:
"There's one area where we see, from a consumption perspective, important change, which is I don't have as much money to spend on myself, so I'm not thinking about being as extravagant on what I'm spending. But I'm going to make my dollars work harder for me.
And so as it relates to retail, this idea of showrooming, or applying different apps or different websites to help you find the absolute lowest price that you can buy something for. Or being patient, waiting for something to go on sale before you actually do buy it."
That's not to say that Millennials aren't spending - they're just being extra choosy about what they deem worthy, which oftentimes translates to experiences, such as a nice vacation, instead of assets, like buying a car or home.
"As it relates to some of these sort of big-ticket purchases, it's not that millennials want to stay at home forever, but they're smart about taking the opportunity to save and then finally when they have enough of a nest egg built, going ahead and buying a home," Drucker Mann says.
This trend becomes especially apparent as millennials start to have kids. Case in point: baby food. In the past five years, packaged baby food sales have come under extreme pressure, down over 30%, according to Drucker Mann.
That's because new parents are no longer opting for premade baby food, instead choosing to prepare fresh meals at home.
Despite being sleep-deprived and strapped for time, millennial moms are choosing to forgo convenience in favor of the transparency that comes from knowing exactly what they're feeding their babies.
"The transparency and purity of the food that she's giving her child is that much more important to her that she's actually, as we think about the development of consumption and the shift towards packaged, taking a couple of steps back from where consumers have been going for many, many decades," Drucker Mann says.
And as these shopping habits continue to skew away from those of Baby Boomers and Gen X, companies are scrambling to figure out how to adapt.