In this three-part blog series, we will discuss the Millennial generation in regard to their consumer purchasing power and within the B2B workforce. We will first explore their discretionary income in the marketplace as consumers. Next, we will develop a better understanding of their social influence as a generation, and then conclude with a discussion of Millennial purchasing power as it pertains directly to B2B and the signage/manufacturing industry.
The topic of generational differences has captured the interest of the media in recent years, particularly within the workplace. Now that the majority of millennials have entered the workforce, they have a measurable discretionary income. When you factor in the 73.1 million Millennials currently living in the U.S., it rounds out to some pretty significant purchasing power. To account for this growing purchasing power, businesses are modifying their products, services, and marketing to fit Millennials’ preferences. However, in order to fully grasp the impact of Millennial purchasing power, we must review what has shaped them as a generation and take an in-depth look at their true financial status.
Characterizing the Millennial Generation
While there is some debate about how to categorize the Millennial generation, Pew Research Center offers a comprehensive overview of the Millennial timeline. One notable aspect of the Millennial generation is the internet/technology explosion. The first iPhone was released in 2007; with it, users could access the World Wide Web right from their own handheld device. Millennials never looked back.
Since then, developing technology and the internet have drastically impacted communication and the speed of daily life. They enable lighting fast information-gathering and near-instant communication.
Amazon Prime is one great example of the marketplace adapting to tech-savvy Millennials. With a single click, users can purchase almost any item and expect it to be on their doorstep within days. Other examples include the expectation that emails will be answered in at most 24 hours, if not within the hour. Technology has fostered a culture of instant gratification, and Millennials expect this to be a part of the buying experience.
Changing Financial Landscape
At 56 million, Millennials are the largest generation in the U.S. workforce today. In 2018, the median Millennial household income was $71,400. This is similar to the median household income of $70,700 Gen Xers made at that same age. However, the economic landscape looks a bit different for the young adults of today than it did for previous generations.
It is important to note that many Millennials entered the workforce during the 2008 Recession. This factor had the greatest impact on Millennials who don’t have a college education. Pew Research Center indicates that Millennials with no college degree made nearly $3,000 less annually than what Baby Boomers with no college degree made in 1982.
But what about Millennials who do have a college degree? Does higher education make a difference in financial status?
College Education vs. Student Debt
While Millennials are one of the most educated generations, they have a large residual financial burden—student debt. And though people with college degrees tend to earn more over a lifetime, Millennials aren’t getting quite the ROI on their education as past generations. They bear the brunt of the student loan crisis, to the tune of a combined $1.3 trillion, an amount that has more than doubled in the last decade.
On average, Millennials with a college education carry an individual $33,000 in student loan debt. This is quite the disparity compared to the less than $2,000 that Boomers owed in student debt as young adults. Accounting for inflation, $2,000 by 2019 terms is roughly $4,130. Since 1988, the price of attending college has risen over 160%. One study even noted that Millennials with a college diploma and student debt earn roughly the same amount as a Baby Boomer would have earned with no college degree at the same age.
Other Financial Burdens
In congruence with the student debt crisis and due to the 2008 Recession, many Millennials aren’t buying homes. This is unsurprising considering that housing prices have risen nearly 40% in the past decade.
There are several other indications that Millennials are missing traditional adulthood milestones. A recent report by Business Insider and Morning Consult found that more than half of Millennials don’t have a retirement account and the majority have less than $5,000 in savings. Their discretionary purchasing has also decreased, as exemplified by the fact that Millennials are spending only two-thirds of what Boomers and Gen Xers do on entertainment, and are spending 2% less on apparel.
A New Hope for Millennials
Despite the various heavy financial burdens that Millennials bear, they have a $600 billion consumer purchasing power. In 2020, they are projected to spend $1.4 trillion. This number is only anticipated to increase as Millennials’ advance in their careers. In fact, since 2005 the number of Millennials in workplace leadership positions has increased 15%. Paychex reports that the annual growth rate of hourly earnings for Millennials (5.8%) is nearly double the national average (3%).
For manufacturing companies like NAS, there is one important thing to keep in mind. In addition to their significant consumer purchasing power, Millennials will begin to control what their businesses value in the products and services they purchase as they climb the corporate ladder. They are the future, so businesses must explore how to adapt to the new wave of Millennial demands.