Viewpoints

Supermarkets’ Future at Mercy of Millennials

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You’d think Supermarket News editors have heard it all after 17 years of conducting annual financial analyst roundtables.

But the most recent one, profiled this week, was different and in some ways bleaker than the others.

The top-notch group of analysts did their usual excellent job of assessing the business outlook, but they kept pointing to deep-seated societal problems that defied easy solutions.

“I am very concerned that we are on a long, steady path downward,” said John Heinbockel, managing director at Guggenheim Securities, about economic challenges.

Financial pressures have “been more or less the story of the middle class for years, and it will probably destroy the supermarket industry as we know it if we continue down this path,” said Scott Mushkin, an analyst with Jefferies & Co.

In a new wrinkle, there was more emphasis on one demographic group that represents either peril or promise for supermarkets. Millennials, it was said, will have an outsized impact on the future course of supermarkets. Those shoppers, who range in age approximately from their late teens to the mid-30s, are really feeling the economic heat.

“There’s a massive wave of Millennials that are 22 years old, and the unemployment rate for people ages 25 to 34 is already really high,” Mushkin said.

REFRESH Blog: Will Millennials Really Change the Game?

Importantly, Millennials have been holding off on forming households, Mushkin added, a factor that is further pressuring the economy and food retailing. He said the percentage of people 25 to 34 living in multi-generational households is the highest since the 1940s.

But the story isn’t all doom and gloom. There’s a chance that Millennials could spark “a renaissance of the food-at-home industry sometime next year” if younger consumers begin to speed up household formation, especially if the economy lends a bit of cooperation, Mushkin emphasized.

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Earlier this year, Mushkin and his company released a report, called “Trouble in Aisle 5,” which urged supermarkets to make changes aimed at drawing more Millennial shoppers.

All this makes sense because this generation will become more important as the influence of Baby Boomers fades. But unlike Boomers, Millennials need to be sold on supermarkets as the outlet that best meets their needs.

Supermarkets can’t control the economy or the pace of household formation. But they can position themselves to be ready when the stars are in alignment.

Discuss this Blog Entry 3

on Sep 17, 2012

David, you’ve drawn a compelling “call to action” from the roundtable.

As John Heinbockel points out, there’s been a “steady downward” movement in the vital signs for the business; e.g. the percent of annual grocery shopping trips going to supermarkets. What we want to keep in mind is that some grocers are doing a lot better than others, so the averages can be misleading. Today we drive fifteen minutes to a grocery store we prefer when the nearest store is just five minutes away. Our preferred store is certainly winning.

Turning to the challenge posed by millennials who are facing tough economic times, the thing they depend on almost as much as air is their mobile phone. If we want their business, we need to find ways to communicate with them on their terms. Good smartphone apps and texting promotions are a couple of ways to do it. What needs to happen before more grocery retailers seriously embrace mobile?

on Sep 17, 2012

You wrote "Those shoppers, who range in age approximately from their late teens to the mid-30s".

However a person today who is between 31 and the "mid thirties is a Gen Xer (not a Millennial).

See New York Times bestseller titled "Generations" by Neil Howe and Bill Strauss -- who coined the term "Millennials".

on Sep 17, 2012

When it comes to Gen Y analysis, it appears Mushkin is the lone ranger. This portends ominously for the traditional grocers. At some point in 2014 the Boomers will cede their #1 position as the leading consumer of food to the ‘Millennials.’

Conspicuously absent in the roundtable dialogue was an assessment of leadership effectiveness for the respective companies, especially as it relates to this generation, both as consumers and employees.

Which of the companies mentioned are best equipped to provide the Millennials the shopping experience they’re looking for? Mind you, this will be the same generation from whom the majority of their workforce will be comprised.

Which company, if any, is best in class in that arena?

Next time you shop at one the “big four” in southern California, look into the eyes of all those Millennials, and ask this question: Does management have a clue?

I’m a soothsayer. I know the answer.

Dan Riley ~ TheInspiredGrcocer

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David Orgel

David Orgel is executive director, content & user engagement, of Supermarket News (SN) and its website, SupermarketNews.com. Orgel delivers his opinions on industry trends through a bi-weekly...

Jon Springer

Jon Springer has been writing about food, food retailers and food retailing for more than 10 years, and is in his second tour of duty with Supermarket News. His prior experience includes covering the...
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