But now, Generation Y is entering its prime spending years — and it’s set to receive $30T in wealth from baby boomers and Gen X. These are the industries that stand to benefit the most.
Some industries benefiting from millennials’ increased spending power, such as travel, reflect well-worn Gen Y tropes like the general preference for “experiences” over objects. Others, like car ownership and camping, show that many of the claims about millennials’ different spending habits are overblown, and that significant continuities exist between Gen Y and their parents and grandparents.
Activities & hobbies
1. Camping industry
2. Fitness industry
3. Travel industry
Consumer goods
4. Fast casual dining industry
5. Coffee industry
6. Frozen foods industry
7. Seltzer industry
8. Houseplant industry
9. Skincare industry
Transportation
10. Automotive industry
11. Micromobility industry
Finance
Many millennials are excited about the prospect of traveling in a post-pandemic world. A majority have either already booked a trip for 2021 or expect to do so in the near future, according to Airbnb. And millennial travelers are already planning to outspend other generational cohorts, with an average of $5,462 saved for their next trip compared to the average of $3,444, according to Expedia.
However, while many millennials are eager to hit the road, the pandemic has prompted many travelers to reassess what they’re looking for in their next break. Travel to visit family has become significantly more important to many consumers, and more travelers are prioritizing safety than they were in the past.
Music festivals, cultural and culinary events, multi-day dance parties and artistic happenings all must be on the menu of destinations looking to attract more millennials.“ — Michel Karam, founder and CEO, müvTravel
Fast casual dining industry
MILLENNIALS OPT FOR SPEED, SELECTION, AND VARIETY WHEN THEY EAT OUT
Problems in the casual dining industry came to a head in 2017, as popular chains like TGI Fridays and Applebee’s were forced to shutter dozens of locations amid slumping sales and reduced traffic. The primary culprit, according to analysts, was millennials — a generation that allegedly no longer goes out to eat, preferring to cook or order takeout.
Fast casual restaurants from Chipotle and Subway to Shake Shack and Five Guys are largely designed with these preferences in mind, with fast ordering and app-powered pickup and delivery as basic pillars of their model. Fast casual dining also has an average check size around $9-$14, compared to less than $9 for fast food and as much as $20-$50 for higher-end casual dining. This gives millennials a dining option that doesn’t sacrifice too much quality for affordability.
The fast casual industry has also seen a wide proliferation of varied cuisines and tastes. From the successful vegan outlet By Chloe to the plant-based sandwiches at Next Level Burger to the sushi kiosks of Miso Ko, there’s a fast casual option for virtually any set of dietary restrictions and ethical choices.
DITCHING SODA, MILLENNIALS SEEK A HEALTHIER FIZZ IN THEIR DRINKS
While many millennials have little appetite for sugary sodas, that doesn’t mean they aren’t looking for other carbonated beverage options — and they’re finding them in seltzers and flavored sparkling waters.
Sales of sugary carbonated drinks have been on the decline for years, with many of the largest soda manufacturers going back to the drawing board as consumers turn toward healthier alternatives.
LaCroix, long a favorite beverage among millennial consumers, saw strong sales throughout 2020 as more consumers were introduced to the brand. LaCroix’s parent company, National Beverage Corp., reported $246M in net sales during the third quarter of fiscal 2021, an increase of 10% year-over-year and one of the company’s strongest-ever quarters.
DRIVEN BY CONSCIOUS CONSUMERISM AND ONLINE-FIRST STRATEGIES, SMALLER COMPANIES GAIN GROUND ON LEGACY COMPETITION
Over the last several years, the cosmetics industry has seen strong growth, driven largely by millennials’ new discovery and purchasing behaviors and the rise of niche brands catering to their preferences.
As of 2017, millennial shoppers were buying 25% more cosmetics than 2 years prior, and significantly more than baby boomers, with self-described “makeup enthusiasts” using 6 or more products each day, according to NPD.
This tendency to use social media to find products has spurred the growth of new online-first and D2C beauty brands like Glossier, which has used Instagram as its primary marketing channel and surpassed $100M in sales in 2018.
Meanwhile, brick-and-mortar beauty brands like Ulta Beauty are embracing niche merchandising as a strategy to lure consumers. Ulta has worked with the Kardashians, become the exclusive retail partner of popular skincare brand Peach & Lily in early 2019, and announced that 1,200 Ulta Beauty stores will carry D2C company Madison Reed’s products. While some cosmetics and beauty brands struggled to mitigate the impact of the pandemic, Ulta achieved 10% revenue growth in 2020, and the company experienced a record-breaking Q1 fiscal 2021, with a 66% increase in year-over-year comparable sales.
Millennials continue to drive innovation in skincare through their purchasing decisions. While millennials are generally price-conscientious, 73% are willing to pay more for products that are sustainable (compared to 66% of average consumers), with a lack of testing on animals as their highest priority.
MILLENNIALS STILL WANT TO DRIVE — THEY JUST WANT CHEAPER, MORE EFFICIENT VEHICLES
Despite their concern for the environment and reputation as bicycle riders and public transportation commuters, a large portion of Generation Y is just as keen to get behind the wheel as their parents were. They now represent 45% of first-time car owners, and in terms of vehicle-miles traveled, millennials actually drive more than other generations (controlling for factors like marriage and urban living).
Data published in Experian’s Market Trends Review indicates that, of all generational cohorts, millennial and Gen Z consumers were the only 2 demographics that spurred auto industry growth during Q3’20.
The same trend can be seen in vehicle registrations. In 2019, millennial drivers accounted for 26.4% of all new vehicle registrations. In 2020, that figure climbed to 28.6%.
Millennials also have a demonstrated preference for foreign-made vehicles. Of the 10 most popular vehicle brands among millennial consumers, only 2 are American. Japanese automakers Honda, Nissan, and Toyota — routinely rated as among the most reliable vehicle brands in the world — typically top the list of the most popular vehicle brands among millennial consumers.
Millennials are not as partial to EVs as expected. A survey conducted in 2017 indicated that as many as 70% of millennial respondents had little or no interest in purchasing an EV, especially among first-time buyers. Millennials’ environmentally conscious purchasing decisions and awareness of climate change have not yet translated into purchases of EVs.
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