Millennials, born between roughly 1980 and 1995, are a big talking point right now. They’re about to become the biggest living generation, and their shopping behavior differs from older age groups; so-called baby boomers (born 1946-1964) and gen X (born 1965-1979). And their wallets are opening up – in 2020, millennials are predicted to spend a breathtaking 1.4 trillion US dollars. This is a great opportunity for online merchants, but first they must really get to know millennials in order to be able to tailor the online experience to suit their wants and needs.
The colossal credit concern
One of the major distinctions between millennials and their predecessors is their attitude towards credit cards. Whereas boomers and gen X incorporated credit as a natural part of their lives, millennials are way more hesitant. As a matter of fact, 67% of millennials don’t even have a credit card. Instead, debit cards are the new star of the scene.
When we consider the world and reality in which millennials have been brought up, the shift in payment preference isn’t too surprising. Many millennials graduated from school into a highly competitive job market with few jobs and low salaries. At the same time, they experienced a brutal financial collapse. To add to this, the cost of living is higher than ever before and student debts have reached record levels. In these harsh economic conditions, they don’t want to go any further into debt.
But the paradox is – millennials still need to make bigger purchases. Maybe their car breaks down, they need a new winter wardrobe, or the oven goes kaput and they need to replace it asap. Without a credit card or enough savings (33% of millennials don’t have any savings at all), larger purchases present a dilemma.
The fear is real – and so are the needs
It’s important to understand how immense the fear is. Among millennials, more people say they are afraid of credit card debt than war, climate change or even death. That means it’s a pretty huge fear, to say the least. Digging deeper, we find that credit card interest is the top fear for 70 percent of 18-34-year-olds.
Back in the day, credit cards were the main option for consumers who wanted to spread out payments and afford bigger purchases. But that’s just not the case anymore. Now, millennials can choose from a variety of flexible payment solutions as their purchasing power grows and they become more and more established in the market.
The challenge for retailers is to meet the needs of millennials in order to attract the group. What are those needs, exactly? They boil down to three main things.
- Joy. Consumers hate boredom, and yes, payments and finances can be dull. The shopping experience needs to be seamless, fast and delightful.
- Time. Who wants to waste their precious time on transactions? Customers should be able to spend more time on what they love.
- Control. Shoppers need flexibility and the ability to control their purchases and cash-flow.
Other traits of the generation
Besides their aversion to credit cards, millennials have some other notable characteristics. Data from a survey by Prosper shows that millennials consider free shipping and low prices less important than older generations. Instead, they place higher value on the option of same-day delivery. Immediacy and convenience are two of their major desires, according to the study.
Don’t be fooled by stereotypes about millennials being disloyal customers. According to a study by Accenture, the age group can actually be incredibly loyal if treated right. They just need to be pampered with personalization and targeted promotions and discounts in order to feel valued.
A millennial shopper is a savvy online customer and more likely to research the product they intend to buy before they commit. This behavior applies across channels – they might conduct online research to later end up buying the product in a physical store. At the same time, 68% of millennials demand an integrated online/offline experience, according to Accenture. For example, they want to be able to use a discount coupon on their smartphone in the physical store. The group is also likely to define their needs and read up on their alternatives before consulting a seller, according to CSO Insights.
How to solve the equation
To summarize our findings, millennials definitely have distinct shopping characteristics. They turn their backs on credit cards, yet they still need to make larger purchases and spread the cost over time. Fortunately, there are ways for you as a merchant to give consumers the freedom to pay whenever and however they like, according to their demands. There’s a bunch of payment solutions out there, but how to determine which one to use?
Let’s consider the great need for flexibility among millennials. Klarna offers three different payment options that give shoppers the ability to pay when and how it suits them. They can either pay in four installments every second week or pay later in 30 days. And the best part for consumers? There’s no fees or interest. For larger purchases, the consumer can choose the financing option. It allows them to spread the cost over several months. From the merchant’s point of view, using Klarna’s services leads to an increase in sales and more loyal customers. It’s a deal where everyone’s a winner.