On the surface, it seems Kmart hosted the ideal promotional event to attract millennials to its new store format and feel: Former Chicago Bull Scottie Pippen signed basketballs while people slam dunked over an ostentatious red sportscar. And Kmart was more than pleased to introduce its concierge service, which lets customers provide a shopping list that’s collected by store employees.
And yet, while the effort was a respectable and creative one, Kmart’s “Whola Lotta Awesome” revamp initiative — one put into motion by parent company Sears Holdings Corp (NASDAQ:SHLD) — is a microcosm of the difficulty retailers face with courting millennials.
That is, at the end of the day, most of the retail industry still doesn’t fully understand how the millennial mind works. Retailers who have found success have been more lucky than skilled.
Close, But Not Quite
The event in Des Plaines, Illinois, kicked off a company-wide initiative aimed at convincing millennials to spend some of their collective $600 billion annual spend in Kmart stores. The underlying assumptions, however, were a bit flawed.
While Scottie Pippen is certainly recognizable to most, the 50 year-old basketballer hasn’t played professionally in the U.S. since 2004. It’s possible there are some millennials, between the ages of 18 and 35, who have never heard the name … and the ones who have may not care. Current stars like LeBron James and Kevin Durant carry actual star power.
Moreover, while the premise of a concierge is compelling, Kmart has yet to appeal to the millennial sensibility. The migration to online shopping is a given, as most brick-and-mortar retailers have largely conceded to Amazon.com, Inc. (NASDAQ:AMZN) on that front. To the extent in-person commerce remains intact, however, many stores are still missing the boat.
Millennials are broadly eschewing expensive brand names, favoring lower-cost (even if lower quality) apparel … a shift that’s taken dead aim at names like Michael Kors Holdings Ltd (NYSE:KORS).
Even so, it’s not necessarily the price tag. Millennials spend more money when spending more money is merited. It’s just that, more often than not, millennials choose experiences over purchases. As a Harris study recently found, 78% of millennials would spend money on an memorable experience rather than a physical item.
The reason Kmart’s event in Des Plaines was a success? It was an experience.
Past that, Kmart (and all other retailers for that matter) still have to sell what the younger generation wants. Considering the 18-to-35 crowd is not only amazingly price-sensitive but also willing to shop at stores catering to their social and environmental preferences, there’s no real assurance Kmart is doing itself any good with a store revamp.
What Millennials Really Want From Retailers
With that as the backdrop, what can the retail industry really do to win market share and mindshare with millennials?
Three key realities must be embraced:
- Experiences Matter: The art of retailing is much more complex than it seems with a quick glance. Neatly folded or neatly stacked goods are only a small piece of the all-important presentation. Smells, sounds, friendly staff and even activities make shopping a (relatively) enjoyable experience rather than a chore. That’s not to say Macy’s Inc (NYSE:M) must set up a rock-climbing wall at each of its locations to attract young people to its stores. But think about the time before Michael Jeffries and overly branded fashion ruined Abercrombie & Fitch Co. (NYSE:ANF). Walking into an A&F was almost like walking into a club, with its thumping music and dim lighting. To that end, it’s worth noting that 82% of millennials still say they prefer shopping in a traditional brick-and-mortar store.
- Authentic Social Media: There’s nothing inherently wrong with a corporate Twitter or Facebook presence. But millennials will never take a post or message viral if it’s clearly from the company, or blatantly self-promotional. Most of the effective social networking marketing is still done by word-of-mouth, from one friend to another. Still, it has to be done. Millennials make more buying decisions based on information gathered online than they do from television or print advertising.
- Appeal to Millennial Brand Loyalty: In partial contradiction with the idea that millennials are price-sensitive shoppers that only use physical stores to make a more informed online purchase, today’s younger generation are loyal to a brand or a store if there’s a reason to be. This includes rewards programs, like the one Starbucks Corporation (NASDAQ:SBUX) has used with great success for years now. It’s not just rewards for repeat business that keep a young customer in a company’s corner, though. It’s the complete experience, including fair prices, decent customer service, a bit of entertainment value and a seamless integration of online and offline shopping. The challenge? When the mechanism is complicated, something’s bound to break. While many retailers do some of those things well, few retailers do all of them well.
Bottom Line on Retailers and Millennials
While most retailers conceptually understand these ideals, few of them have an innate insight into the complex mind of people between the ages of 18 and 35. Many of them have never known a time without the internet or cell phones, or even a time when television stations stopped broadcasting late at night.
The advent of the “always on, always connected” era isn’t just about technology. It’s shaped the way millennials think and spend. What matters to them is different than what matters to the 40-plus crowd.
And it’s this broad, almost-philosophical detail that’s proverbially separating the men from the boys.
If retailers want to thrive, they have to think deeper about what makes a millennial mind works. It may require some uncomfortable changes to what retailing is … changes unlike what we’ve seen so far.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
