While millennials may be one of the least financially secure generations — they have student loans, stagnant wages and a high cost of living — they’re not broke. In fact, millennials will be the largest source of consumer spending within 20 years.
That’s why appealing to this age group is important for retailers striving to build lasting relationships. The best way to do this is to foster consumer trust, according to Nick Molnar, CEO of Afterpay, a pay-by-installments firm that launched in Australia and now counts more than 2 million American users.
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At the WWD Digital Forum, held Sept. 18, Molnar said the majority of U.S. millennials don’t own a credit card (66%) and Gen Z-ers are following that lead. These age groups, which first flexed their economic power after the 2008 recession, have internalized the warning not to spend money they don’t have — and to be wary of businesses trying to take the money that they do.
“The current world is all about profiting off misbehavior, which breeds mistrust,” said Molnar. “I saw a report on CNN that said that millennials are more scared of credit card debt than they are of dying.”
But these consumers are still spending: 47% of millennials and 41% of Gen Z-ers purchase a fashion item each week, according to a survey of Afterpay customers in August 2019. Rather than shopping randomly, these consumers prioritize the brands that they feel they can trust — often by finding them through other trusted sources.
Word of mouth still carries significant weight; recommendations from family and friends were ranked as a top source by 80% of millennials and 78% of Gen Z-ers surveyed. However, social media was ranked first by both demographics, at 92% and 97%, respectively, highlighting the influence of a brand’s direct communication with its audience. Correspondingly, mobile sales account for 49% of millennial purchases and 54% of Gen Z purchases.
Consumers who experience a positive engagement with a brand are more likely to return and seek recommendations from that source. Molnar believes that Afterpay functions in the same way as a trusted brand, promoting its retail partners through its mobile app. Partner Steve Madden received four times more traffic through the Afterpay app than it did through Instagram, according to Molnar. The payment solution is now the second largest driver of traffic in Australia, after Google.
“People look at us as a payment product but we’re not: We’re a marketing channel,” said Molnar. “Payments form the underlying current that allows us to build this relationship with the consumer because they feel we get them.”
While social media encourages these demographics to showcase their individuality, they share consistent shopping habits. By focusing on a trustworthy, secure shopping experience, retailers can better position themselves to take a piece of the $1.4 trillion in spending power that U.S. millennials will have in 2020.
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