New Retail Formats Target the Nation's Next Biggest Buying Group

Step aside, baby boomers. The Millennials are taking your place.

The demographic born between 1980 and 2000, also dubbed Generation Y, will become the biggest consumer buying group by 2020, accounting for $1.4 trillion in spending, according to Accenture data.

Retailers ranging from Whole Foods to Macy’s are taking note, testing new store formats aimed at appealing to these digital natives, who came of age with online shopping, social networks and smartphones, and amid a social climate marked by factors as disparate as a major economic downturn and the rise of a health-and-wellness movement.

Whole Foods’ Lower Priced Spin-Off Format

The upscale organic supermarket is cooking up a “streamlined, hip cool technology-oriented store” that targets Millennials, offering its signature fresh and healthy food — but at lower prices, John Mackey, Whole Foods’ CEO, said during a conference call with investors this month.

That Whole Foods, which has been dubbed “Whole Paycheck” for its steep prices, is going after younger shoppers with a low-price hook comes as little surprise: Millennials, which have also been called “The Recession Generation,” have lived through the worst economic downturn since the Great Depression.

But this group is also packed with people who like to think of themselves as foodies, tend to eat healthfully, and value companies that aspire to socially conscious practices.

Whole Food prides itself on being a proponent of “conscious capitalism.”

They’ve taken on initiatives such as entering food deserts like Detroit, serving shoppers in areas lacking healthy-eating options, to labeling all food products in its U.S. and Canadian stores to indicate whether they contain Genetically Modified Organisms (GMOs) by 2018.

Whole Foods is also betting that the technology enhancements to be featured at its yet-to-be-named format, such as “smart” grocery carts that help consumers navigate stores and scan purchases during their shopping journey, will strike a resonate chord with Millennials.

Ann Taylor’s Lou & Grey

Ann Taylor, with formal, dressy apparel that caters to the working woman, is drawing a younger mix of shoppers to its new six-store Lou & Grey spin-off chain designed to appeal to a “free spirited” female, according to the retailer.

Indeed, a majority of the shoppers at Lou & Grey, which offers “casual, effortless style … are completely new to the company,” said Katherine Krill, CEO of Anne Inc. — which will soon be acquired by the Ascena Group — during a conference call this month.

Macy’s Bluemercury

The department store’s recent acquisition of beauty chain Bluemercury marks a bold bid for the younger consumers flocking to Sephora and Ulta.

These freestanding makeup emporiums are popular among Millennials, drawn by an open-sell model, which lets them handle prestige beauty brands without the mediation of a salesperson, and stock a variety of independent, edgy cosmetics lines that won’t necessarily be found behind department stores’ glossy counters.

Lululemon Spawn Begets Kit and Ace

From the family of Chip Wilson, who founded yoga chain Lululemon, comes Kit and Ace, which sells sporty casual wear that both capitalizes on the “athleisure” fashion trend and woos younger shoppers.

Wilson’s wife Shannon (formerly head of design at Lululemon) and son JJ launched the chain last year.

“What’s really important to [Millennials] is technology and sustainability; Kit and Ace is really pushing that tech aspect,” Anjee Solanki, national director of retail services for Colliers International, the commercial real estate firm, told Forbes.

And it’s being marketed as “hip and cool,” she said. Indeed, the retailer is playing up what it calls “technical luxury” materials, such as machine-washable cashmere.

CityTarget

There are an estimated 11 million Millennials between the ages of 25 and 35, and many of them are new parents; Target TGT -0.14%’s compact, quick-service CityTarget format, based in urban markets, expressly courts this group, Solanki said.

“Millennials are moving to more ‘urban suburbs’ in addition to staying within urban communities,” she said. “With that, Millennials continue to find improved life-balance opportunities and thus look for retail locations where they are able to run in and out and grab daily needs, such as soup, shampoo, prescriptions, etc.”

What’s more, CityTargets are aesthetically distinct, and that’s by design.

The buildings that CityTargets are housed in tend to be “architecturally cool and hip,” she said. “These are psychological strategies they’re playing off of” to appeal to younger shoppers.

http://www.forbes.com/sites/barbarathau/2015/05/28/new-retail-formats-target-the-nations-next-biggest-buying-group/

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