The following article initially appeared in Forbes on June 3, 2015.
In May Goldman Sachs released the fifth report in its series on Millennials — the generation of adults born after 1980 — this year focused on the “Millennial Mom.” With birth rates rising for the first time since the Great Recession and Millennials on the cusp of usurping Baby Boomers as the country’s biggest spenders – the time is now, Goldman argues, to invest in firms that leverage these trends.
While Goldman’s data is factual, its conclusions are incorrect. The megabank’s top picks? Willams-Sonoma, Hasbro and Carter’s. In other words, established brands that weren’t built for a world run by tech-savvy, socially conscious Millennials.
Where’s the proof? To start, Buzz Marketing Group, a leading youth focused research firm (where I worked a decade ago), reported in its March 2015 “Millennials and Retail” study, that among 493 respondents “Brand Loyalty” ranked toward the very bottom of the purchasing decision funnel. Value for money, quality of products, promotions, store locations, even store hours were all prioritized noticeably higher. The Millennial, it would seem, regards brands as commoditized. Yet this self reported apathy towards brands is empirically false. Examples such as Jessica Alba’s eco-conscious Honest Company, upstart eyeglass retailer Warby Parker and dozens of other consumer companies growing at breakneck speeds abound.
The resolution to this puzzle is nuanced: It’s not that brands are structurally dying – it’s that traditionally defined brands are dying – replaced by firms, products and media so inextricably connected with Millennials’ lives that they don’t even recognize them as brands. Simply put: advertising-driven, one message-to-many brands are dinosaurs being replaced by immersive, experiential, deeply personal companies. (It should be noted that Goldman also identified firms such as Grubhub, Zulily Whole Foods and Disney for investment – whom could all meet the criteria of being Millennial-first.)
It’s also not that Millennials aren’t loyal – on the contrary, repeat purchase rates at many millennial-first retailers are accelerating – it’s simply that they’re rejecting established names in favor of those built by their peer group. Brands that communicate in an authentic, rather than autocratic, manner. Only a small fraction of the largest companies speak our language. For a decade the power of that reality was all fun and Facebook games – seen in social media adoption and not much else. Millennials didn’t have much purchasing power and weren’t buying cars, houses or healthcare. Ten years later, Millennials are wielding thick wallets. The consequence? Nearly the entire domestic GDP is suddenly up for grabs.
As talk of a technology “bubble” rages on among Silicon Valley pundits, to those of us in the Millennial generation, the approaching onslaught is abundantly clear. The Millennial’s expectation of immediacy, transparency, simplicity, and relatability are the mandates now driving disruption in every industry – not only from the aforementioned examples in consumables and fashion, but also heavy industries such as healthcare, finance and enterprise software.
The profile of an enterprise software CEO is rapidly changing. When I first entered the venture industry four years ago, I would often hear senior operating executives (often in their 60s) proclaim their business model structurally could not succeed with twenty-something founders. The business was too complex, they said, and refused to take a 25 year-old whippersnapper seriously.
Four years later, the founders behind some of the fastest growing enterprise software businesses in history are Millennials: Stripe (ages 26 and 24), Zenefits (age 34), Box (age 31), and Mixpanel (age 26). Their success stems from the growth of cloud-based, API driven infrastructures. Product and business model re-imagination is now easier than ever, enabling “kids” to build software which can be adopted bottoms-up. Meaning lower level employees can integrate the products with existing software (without permission of superiors) and prove its value in real time. This is in sharp contrast to traditional top-down sales cycles.
Speaking at an event this month in San Francisco, noted venture capitalist and early Snapchat investor Jeremy Liew remarked: “It’s hard to predict the future…It’s easier to be open minded about the present.” Present reality is clear: the notion of a corporation broadcasting a message to everyone is dated because customers are actively building the brand of the company themselves – irrespective of whether that company has made such activity permissible. Millennial-first platforms are leveraging this cultural shift by sitting in the stream of conversation and engaging.
The implications are far reaching.The challenge to all incumbents is greater than simply launching an Instagram account. Nor is it merely an academic exercise in disruption. The shift in purchasing power is spurring a holistic re-imagination of our entire economy – and it stands to produce scores of juggernaut businesses – while leaving dinosaur businesses in the dust.