Nobody can compete with Amazon! They just eat up the competition and as a result retail stores are closing by the hundreds and malls are dying. Small businesses with character are forced to go out of business as traffic has just disappeared. Amazon is king and all other retailers big and small are done. That is the conventional wisdom today. But it is not true. The real problem with retail is the low quality of a specific customer set. Those living in the United States and under the age of 45. At the time of their lives where consumer consumption should be highest they don’t have the money.
Millennials and the younger portion of generation-x do not have the excess income to participate in the consumption economy. Not enough to support and drive a strong retail economy. For Amazon to be the one culprit that would mean all buying needs and levels across society remained the same but the money flowed into Amazon’s carts. I don’t believe it. This is knowing full well their sales and growth numbers. I get it.
For employment, my skills are in the marketing analytics realm. Working for companies and studying their customer bases for marketing purposes. I get to know intimately the data concerning numbers of customers, dollars, units, segments, demos, and everything else that flow in and out of large retailers and their marketing databases. Through this work there is a commonality that I have noticed no matter the size, niche, or popularity of the company I am working with. From a straight customer count perspective, the large majority of yearly sales come from customers that make only one or two visits a year. Because the volume of one stop customers is so great they make up most of the total sales. Sure, there exists a slice of brand fanatics that buy a lot every year and frequently. These slices although small in customer count might make up 25% of yearly sales. Very impressive and very nice. However, the biggest slice of the sales pie is still the once a year shopper. Whether they shop during peak makes or breaks companies every year. Marketing has almost completely forgotten this biggest slice of their existing customer universe but that is an article for another time. Instead think about this in terms of the United States retail consumption economy.
In the United States the customer universe for retail consumption consists of baby boomers, generation-x, and millennials. There is also the greatest generation and those who are minors now. But leave them out of this customer universe example. Just millennials, generation-x, and baby boomers.
In short, the majority of millennials and generation-x have been the group most impacted by income equality, the great recession, rising costs, tighter lending, and automation. Their lives cost much more in proportion to just function and participate in society than it did even 10 years ago. Rents are sky high and household income levels flat.
By contrast the baby boomer generation is doing OK. They went through a couple of bubbles but since then the market has recovered and much more. They were at an age in their professional journeys and at the right time during technology advances to thrive. But now they are older and the key fact about this generation, as it relates to the retail consumption customer universe, is that they do not consume as much! In other words, as you get into your fifties and older your need to purchase and consumer declines. Not for any bad reason it is just a fact. You have spent a whole lifetime compiling 50 pairs of pants and you don’t need anymore ever. In summary, the biggest portion of disposable wealth lies in a portion of the customer universe that is less likely to spend.
To round this concept off and bring it back to the retail customer universe in America I leave you with the following. The majority of the customer universe does not have the disposable income available to pump up retailers. Baby boomers do have the ability to spend, but their natural life trend has them consuming less and less each year. The 75% of yearly buyers that make or break your bottom line by shopping once a year are staying home because they don’t have the dough. The 25% that do have the dough don’t need another pair of sneakers ever again. The customer universe in America is stalled and retailers are getting killed. Once the generational turnover occurs, and money flows more freely into the pockets of generation-x and millennials, the retail gears will slowly start churning again.
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