As part of a joint study with consultancy cabinet Roland Berger, Laurent Delmas, COO South Europe Global Blue and Sébastien Manceau, Roland Berger Retail and Tourism share their vision on the Millennial generation
What are some key characteristics defining the Millennial globe traveller and shopper compared to other generations?
In few sectors have Millennials had more impact than in travel and tourism. Their expectations and behavior are significantly different from their parents’ and older generations’.
Their whole travel journey has changed, from the initial inspiration phase to the actual travel and holiday experience. The importance of social media as influencer on the choice of holiday for example, the quest for authentic holiday experiences and off-beaten track adventures, the demand for personalized services, their awareness of security threats…. Changes are happening along the entire value chain.
Millennials are changing the way industries used to function, mainly because they are the first generation to handle everything digitally. The travel and tourism industry has already undergone a massive digital transformation with offers like Booking.com and Airbnb being the new normal and the expectations of Millennials are fueling further changes.
But if Millennials have set a new (digital) standard, their requirements have spread to other generations and today, it is difficult to tell who is driving change in consumer behavior. What is sure is that Millennials are bringing a huge momentum to the travel industry.
These differences between a younger set of consumers and older generations do not stop at the travel industry. In terms of shopping aspirations also, Millennial Globe Shoppers display distinctive characteristics. Regarding luxury shopping products first of all, our data show that Millennials prioritise leather goods and accessories over fashion garments. If anything, it suggests that they first access to luxury through the purchase of a staple designer bag, probably because these items are more heavily branded and identifiable than clothes. In terms of shopping location also, their search for convenience, smooth shopping experience and additional services drives them towards department stores more frequently than other any other generation.
Budget wise, at 3,000€, if Millennials’ spending is below average (3,300€), it is still in line with their parents’ and highly promising for the luxury industry when the entire group will have reached its earning peak.
Even better is Millennials’ use of Tax Free Shopping (TFS). In 2017, they represented almost a third of all TFS transactions emitted in the world, an impressive +14% growth compared to the year before. They have become the leading users of TFS, far before baby boomers and the gen X. Jumping in on Sébastien’s remark about their use of the digital, again, it is their absolute need for convenience which attracts them to digital TFS solutions. For brands, this new attitude towards TFS has the potential to generate additional sales in store.
What is the impact of the Millennial traveller on the tourism and retail industries?
Firstly, Millennials impacted the overall destination mix. They have helped revive city trips as most of their expectations towards holidays find an answer in a city environment. Some cities have cleverly adapted their marketing and offers to this target group. On top of that, international companies such as WeWork or Regus offer global travellers solution to mix leisure and business. This increasing “bleisure” trend helped cities take the lion’s share of tourism growth.
Secondly, Millennials have forced historical travel players to adapt their communication. While in many industries Millennials are “only” seen as a communication target, travel and tourism players have deeply re-invented their model to correspond to Millennial expectations. For example, AccorHotels is accelerating the digital transformation of the entire company, enriching its offering with the acquisition of lifestyle hotels (e.g. Mamma Shelter), developing a new accommodation format (Jo&Joe) or setting up a Millennial shadow cabinet to impact senior management decision making process.
Last but not least, Millennials have set the ground for new business models in previously non-existing markets. Companies, such as Airbnb (with their accommodation and “Trips” offer), have been founded to serve needs initially expressed by Millennials. Now these needs are becoming universal and Millennials do not necessarily represent a direct business target anymore.
Millennials’ impact on the retail industry is unprecedented. Their behavior has forced retailers to review their products, pricings, services and the way they engage with them. For brands, one of the greatest challenge is to provide a differentiating retail offer to a volatile generation, accustomed to cross-border and offline/online shopping.
The value they attribute to “experience” when shopping represents a great opportunity for retailers to win them over. In stores, these one-shot experiences take the shape of cultural events, art installations, exclusive concerts at Selfridges in London or sports classes at Saks 5th Avenue, New York. Outside the stores, iconic brands have at heart to promote their strong heritage by way of opening their own fashion museum such as Prada in Milan, when invited to display their own fashion archives such as Dior a few months back in Paris’ Musée des Arts Décoratifs or when curating their own exhibition like Gucci in Chatsworth House, England.
Regarding products, much like when they travel off the beaten-track on the lookout for extra-ordinary adventures and encounters, Millennials apply this similar way of thinking when shopping. Today, rarity is the new luxury. Several retailers have been quick to identify this trend. For example, British skateboard brand Palace has taken the road of a smaller quantity of products manufactured in the bid to generate a “must-have” sentiment. In parallel, collaborations between Louis Vuitton and streetwear label Supreme for example create a sense of urgency around these limited-edition products.
Other generations are permeable to the Millennial effect; they have started to imitate their offsprings’ demands and likings. For the retail industry, this phenomenon is a great opportunity to review its product design and retail model to address a wider scope of consumers.
How can companies and organisations from the travel industry best adapt themselves to these new consumers?
(Millennial) travellers are looking for new experiences, combining a new destination with unusual activities, where they authentically explore a city or a country and combine getting to know locals and local customs with enjoying typical activities on site.
Serving these needs for new destinations, personalized trips and local activities will help appeal to the new consumers.
And it does not have to be stiff or in a formal way. In contrast, Millennial travellers feel at ease with a relaxed and informal hospitality style as long as the service is excellent, and they get what they want.
How can retail brands benefit from Millennial travellers’ expenditure when they shop abroad?
For brands and retailers across the world, offering Globe Shoppers innovative TFS solutions, digital especially, and services is a great incentive to stimulate Millennial tourists’ spending when they shop abroad. Global Blue’s portfolio includes digital solutions where Chinese tourists can receive their VAT back instantly onto their Alipay or WeChat digital wallet.
In parallel, back in 2017, we launched Mobile Customer Care (MCC), to bring real-time support to travellers. MCC relies on a notification service where a series of personalized transaction-triggered emails and SMS are sent to Globe Shoppers’ phones to guide them from the initial TFS transaction all the way through to confirmation of the refund payment. From July to December 2017, we estimate that Millennials represented 40% of all MCC transactions.
We have also developed a suite of services targeting high spending shoppers. Spread across key European shopping capitals, our VIP lounges offer an exclusive experience in a relaxing environment at the end of our customers’ spending spree. Millennial Globe Shoppers were over-represented by 10% in the Milan lounge, which ties in well with their desire for out of the ordinary experiences.
More than ever, being able to offer in-store TFS solutions has become a key leverage for brands wishing to make the most of Millennial Globe Shoppers’ increasing spending power.