New York – A recent study shows that out of all consumer whose financial position has improved in the last year, Millenials were the most likely generation to increase spending on consumer products.
Within the apparel segment, consumers are favouring value brands, those with strong value proposition, such as fast fashion, quality/price, fashionable private label, as highlighted in the recently released Deloitte’s survey ‘The consumer products divide’.
Millennials who perceive an improvement in their financial position are more likely to spend on trends and treats, particularly within apparel (38 percent compared to 20 percent of Generation X and baby boomers) and beverages (31 percent compared to 15 percent of Generation X and baby boomers). Of those citing an improved financial position, millennials are more likely than other generations to cite trend as a reason for purchases in a given category (30 percent vs. 24 percent for Generation X and 18 percent for baby boomers) and are more likely to cite new product discovery as a key reason why (22 percent for millennials vs. 12–15 percent for other generations).
As the economic climate changes and particularly Millennials adjust spending patterns in response, consumer brands are advised to shift gear to grow or adapt their brands. Communicating value to consumers as apparel is the highest "splurge" or "pull back" category and planning for reduction in volume, including private label are some of the consulting firm’s recommendations for apparel retailers.
Apparel witnessed the greatest divergence in spend between those that reported improving and those that reported worsening financial positions: Nearly half of shoppers (47 percent) with brighter financial conditions increased their spending on apparel, while 61 percent of those with dimmer finances spent less, highest of all the categories on both counts. However, a change in financial position shifted how much consumers spent (volume), rather than what they bought.
Among those individuals who bought more, nearly three-quarters (71 percent) put their dollars to work buying more of the same brands, rather than trading up. Only 27 percent cited purchasing different, more expensive brands, lower than all other categories.
Consumers with worsening financial positions cut back volume of purchase to save. In apparel, brands with strong value-oriented propositions were clear winners (see case studies). Another winner was private label, with 40 percent of the lower-income cohort and 24 percent of the higher-income cohort purchasing private label in apparel. This category continues a trend Deloitte noted in 2016-17, when a basket of “value” brands grew 2.5 percent while premium declined 7.1 percent.
“Apparel companies need to tread carefully, given the propensity of consumers to either splurge or pull back sharply in this category. It is important to be able to drive home a strong value proposition to the shopper, clearly communicating price/value tradeoff. And companies will need to be nimble in a recessionary environment, with demand forecasting and supply-chain planning to manage a reduction in volume,” conclude the study.
Photo credits: Levi's Star Wars Collection, Levi's official website