Stuck in the middle with you: Retailers ditch focus on Gen Z and Baby Boomers as times grow lean.

11/06/2018 London

Shops are shifting focus away from shoppers of a certain age in a bid to woo younger spenders, new research has shown. According to Hitachi Consulting, 74% of stores are increasingly focusing their operations and service on 19 – 38-year-olds, potentially in a bid to capitalise on mobile and digital spending, as well as capturing the long-term loyalty of the next generation of shoppers.

"Retailers today could be making a grave mistake," said Pierson Broome, Hitachi Consulting. "Clearly, Millennials are digitally savvy and their earning potential may be higher than that of older shoppers, but their actual earnings are significantly lower. In fact, the average national wage of a Millennial is £23,700, compared to £31,146 for 39 – 60-year-olds [1]. Only 14% of retailers said that their current operations are specifically optimised for those over the age of 39, when the reality is that 40 – 49-year-olds have the highest average wages in the country."

The research showed some disparity between how chain stores and independents tackle these different age groups, with a staggering 89% of independent retailers targeting Gen Z and Millennials, compared to 73% of chain stores. Less than one in ten (8%) of chain stores indicated they were targeting all age groups equally, compared to just 3% of independents.

"Rising rent prices and student debt, to name just two factors, may significantly reduce the disposable income for Millennials and Generation Z, however high their gross earnings. These groups can be relatively digitally savvy, price-sensitive shoppers, compared to other groups," continued Pierson. "Retailers could be making a mistake by alienating older, relatively loyal shoppers who may be empty nesters benefiting from high property values and in some cases final salary pensions."

This focus is also clear from retailers’ priorities for flagship stores, with over a quarter (26%) suggesting that the most important feature of their flagship store for the future is augmented / virtual reality or drones, with only 14% focusing on more pragmatic innovations like till-free shopping and 13% on improved digital signage.

"Retailers focusing on novelty rather than innovation may succeed in grabbing attention for a season or two, but if done in isolation, it becomes a race to the bottom," concluded Broome. "Instead, retailers should focus on a diverse, meaningful strategy that adds real value and business efficiency. This digital transformation will help the back-end of the business to be as lean as possible, while making the front-end experience for the consumer as accessible and versatile as possible – and that’s a change which should benefit all age groups."

About Hitachi Consulting
Hitachi Consulting is the digital solutions and professional services organisation within Hitachi Ltd., a global technology and social innovation leader. Hitachi Consulting is a catalyst for positive business change, propelling organisations to drive disruptive innovation and to accelerate digital transformation. We help organisations leverage data as a strategic asset to innovate faster, develop new revenue streams, and respond to global dynamics with insight and agility. We collaborate with clients to create solutions that help maximise operational efficiency and deliver measurable, sustainable business results. Visit us at www.hitachiconsulting.com.

About Hitachi, Ltd
Hitachi, Ltd. (TSE: 6501), headquartered in Tokyo, Japan, delivers innovations that answer society’s challenges with our talented team and proven experience in global markets. The company’s consolidated revenues for fiscal 2016 (ended March 31, 2017) totalled 10,034 billion yen ($89.3 billion). Hitachi is focusing more than ever on the Social Innovation Business, which includes power & infrastructure systems, information & telecommunication systems, construction machinery, high functional materials & components, automotive systems, healthcare and others. For more information on Hitachi, please visit the company's website at http://www.hitachi.com.

[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2017provisionaland2016revisedresults#earnings-by-age-group