So What, Who Cares (vol 3, issue 27) Why 'The Bank of Mom & Dad' is the newest customer segment
Hello!
Here's a bit of podcast-y self promotion: The Flash is back and so is the Flash Flashcast with me, Tony Sindelar (@tsindelar) and Philip Mozolak (@moze) -- you can listen here.
Also! Relay.FM has launched a new weekly podcast called Download, in which people who do or follow tech for a living talk about the week's biggest tech news.
I'm on the first episode with Jason Snell (@jsnell) and Serenity Caldwell (@settern), talking about Amazon's e-commerce play and the Juicero, and I was on yesterday's episode with Carolina Milanesi (@caro_milanesi) and Jason Snell (@jsnell) talking about tech company earnings and Microsoft's new educational play.
If you've ever wondered how I approach the day job where I am a tech reporter and editor, take a listen.
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The people who dedicate their professional lives to the task of answering the question, "How do I separate the American consumer from her cash?" are still trying to figure out what it takes to pry money from Millennials. To wit:
[Their] spending habits continue to fascinate — and frustrate — retailers as 20- and 30-somethings defy the consumption patterns that previous generations followed for years. One major difference: Millennials are far less likely to buy something because it's convenient, something many companies capitalize on. Rather, they're focusing on value.
"Value" in this case does not necessarily map to "You're getting the most out of your money." Nielsen Research found that the most desirable spending demographic defines value as something that enhances their time (i.e the experience premium) or gives back to society. These are a lot harder to scale than "we've rejiggered the t-shirt-making robot to make more shirts per hour, so now we can offer them for $2 less per unit."
So what? Baby boomers are aging out of their prime consumer years, Millennials aren't sloshing money into the traditional spending categories, and marketers are beginning to get nervous about their long-term prospects.
Who cares? Industries that used to rely on consumerist rites-of-passage as a way to guarantee a steady flow of revenue.
At a party once, I chatted with an acquaintance who had worked as a consultant with Crayola, and he told me that the most fascinating insight he had taken away from the company was how they tied their sales forecasts to the birth records the Social Security Administration keeps. This way, the company could anticipate fluctuations in the birth rate and scale production up or down, as they'd collected enough data on buying trends to know when families reach Peak Crayon.
I don't know whether this is true any more -- and I'd love to know how they're rolling the adult coloring-book trend into their sales projections, since that hobby is a lot less ubiquitous to a generational cohort than coloring in grade school is. But the point remains: Companies can and do take a look at generational cohorts to estimate the size of a future customer base. What they may or may not anticipate are the factors that render their product irrelevant to a projected audience.
Furniture is a perfect example of this. People used to buy furniture when they bought a house. Adults under the age of 35 are not buying houses like they used to. And how can they? The median annual income for adults under age 27 is approximately $25,000; it rises to $8,000 for adults between 27 and 35. And the average student loan debt for these same adults is approximately $37,000; depending on what kind of loans our young adult has, they could be paying their lenders anywhere from $200 to $450 a month. Now try making those payments when you're netting approximately $750 per paycheck after taxes. Are you really going to drop $1200 on a Peggy couch, much less assume the kind of mortgage required for a U.S. median-priced house of $315,000?
Yet this "debt-saddled young adults are hesitant to buy furniture or houses!" insight still apparently surprises people who wonder why those Millennials won't settle down. Indeed, more adults under 35 live with their parents, beating out the "I've got a roommate (or roommates)," "I'm living alone," "I've got a live-in love monkey (or love monkeys)" and "I have a legal spouse" groups.
Consequently, baby boomers are still the primary furniture shoppers; they make up 42% of all furniture-buyers in the U.S. and 45% of all money spent on furniture. And this isn't just because baby boomers are busy furnishing their new retirement homes. Some retailers aimed at young adults are actually targeting their parents. At Matthew Zeitlin reported for Buzzfeed:
“The bank of mom and dad is our current customer,” the CEO of West Elm parent company Williams-Sonoma told investors on a call in 2015. “Student debt is greater than all credit card debt and substantially greater than all car financing debt. So that has to get paid off."
How sustainable this intergenerational wealth transfer will be as an engine of the U.S. economy remains to be seen. As Pew Research Center's Richard Fry said, “The spending that goes on in the formation of a household – the furniture purchases, the appliance purchases, the cable subscriptions, that isn’t happening.”
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Your pop culture recommendation for the day: In ninth grade, our English class had an earnest young student teacher
whose name I have, regrettably, forgotten. I will always admire how she showed a class of fourteen-year-olds the Franco Zeffirelli adaptation of Romeo and Juliet, and cowed all the teenaged sniggering over the topless scene with a calm, "Well, what did you think would happen?"
I ended up one of this teacher's favorites and she invited me and a few other students to a concert; she said she wanted to share "a meaningful musical experience."
And that's how I ended up at a Twila Paris concert by accident.
Contemporary Christian music (CCM) was not part of my upbringing, so ninth-grade Lisa found CCM fascinating in the way that any cultural outsider tries to understand the conventions of a world into which they'll never assimilate.
Hurtle forward to the present: Hazlitt has run an insider's account of growing up with this music as their primary cultural touchstone, with "Lead Me On" by Lyz Lenz, a beautiful, piercing account of how Amy Grant's music helped a girl articulate her sense of self when she was denied any other opportunity to cultivate a vocabulary of self determination.
If you read and enjoyed Lindsay Robertson's piece for the Awl, "Old Christian Videos: Amy Grant's 'Lead Me On,'" I guarantee you will love Lenz's piece, and I bet you'll join me in looking through her back catalog of work on Contently.
And for grins, here's the video for "Lead Me On," smack in the middle of Adam P. Newton's own meditation on Amy Grant, that song, and how his own relationship to it has changed as he's gotten older.
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