Why millennials are driving retailers nuts

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Generation Y-ers are famously flighty and difficult to please. And that means they’re behind some of the most exciting retail innovations yet. By Gillian Drummond. Cover photo courtesy of Rebecca Minkoff.

When retailers gathered for the Global Retailing Conference in Tucson last week, there were no “turn off your cell phone” pleas. That’s because cells and mobile technology were at the heart of just about every presentation.

Stalwarts like Macy’s and Starbucks were joined by newer stores like Gilt.com to discuss the future of retailing. But for most of them the issue was more specific: millennials and what (or should we say wtf) to do with them.

Grabbing hold of Gen Y-ers’ attention, loyalty and spending power – all $200bn a year of it – is like trying to hold onto a slippery fish. They’re “scrappy”, “savvy” and “unconventional”, says Gilt.com’s Clay Cowan. They’re glued to their smart phones but not to their possessions (the latter they’re happy to share or give away). They loathe, and reject, traditional forms of advertising. They also don’t like personal interaction too much. Many of them have gigs in addition to their regular jobs, like D.J.-ing or blogging or designing. They love to shop (and they dictate the country’s fashion and food trends) but not to spend too much money. In other words, they’re hard work.

“They’re very hard to succeed with,” admits Clay, Chief Marketing Officer at Gilt.com and one of the speakers at the conference. “They research, research, research, research and then they buy. They’re very very savvy and they’re hard to make money on because they’re doing that.” And these words from a site that prides itself on constantly changing, offering online flash sales of luxury goods and brands.

Because of the millennial generation’s new ways of buying, retailers are having to create a whole new shopping environment, and technology that’s just as smart (well, almost) as the flighty young customers using it. When we were invited to sit in on the conference, put on every year by the University of Arizona’s Terry J. Lundgren Center for Retailing, we couldn’t resist. Here, speakers literally talk shop – pulling apart buying habits, sharing their experiments and plans, and poring over solutions. So what are they cooking up in order to hold onto the next generation of shoppers? You’d be surprised.

1. It’s a storefront, Jim, but not as we know it

Companies are experimenting with digital storefronts, either where they are about to open a store and the space is still vacant, or as pop-up shop experiences. A retail experiment two summers ago in Manhattan saw 24-hour pop-up shops from Kate Spade Saturday, which also had brick-and-mortar stores. The pop-ups lasted for one month and allowed customers to tap on a life-sized computer screen, place an order, and get delivery to their door within an hour. (Kate Spade has since closed its Kate Spade Saturday stores and brand.)

Toms shoe brand, Sony and fashion brand Rebecca Minkoff (see below) have also experimented with digital storefronts and touch-screen technology, all in collaboration with eBay.

2. Welcome to the ‘digical’ world

“Stores are the new black,” quipped Terry Lundgren, chairman, CEO and President of Macy’s and a graduate of the University of Arizona as he opened the conference. Much as millennials love digital shopping, they also enjoy the physical retail experience, he said. Which is why one of retail’s hot new marketing terms is ‘digical’, a mash-up of the words digital and physical.

Digical is a world in which shoppers browse online first, then go to the store,  smartphone in hand, to buy. Macy’s is experimenting with a mobile phone app that will allow shoppers to take a photo of something they like – from a passer-by even – and then try and match the image with a similar product in its online catalog. Having her Macy’s app open in the store will also mean the shopper can be tracked around the store and sent relevant content as she shops.

“Stores haven’t changed in 100 years but customers are changing rapidly and they have devices in their pocket that are extremely powerful,” says Healey Cypher, a retail technologist, former head of retail innovation at eBay and the guy at the helm of eBay’s collaborations with Kate Spade and Rebecca Minkoff. He adds: “Technology should not be dehumanizing the [retail] experience, it should be re-humanizing it.”

Tellingly, Gilt.com – a company that has built itself exclusively online –  is going the other way and bringing humans into the mix. An experiment called The Vault, which gives customers a personal shopping experience at a location in Brooklyn, New York, is set to be tested some more, says Clay Cowan.

3. Changing changing rooms

When fashion designer Rebecca Minkoff and eBay teamed up last year to open two new stores in New York and San Francisco, they changed the face of the changing room experience. Customers check into the store via a touch-screen glass wall that resembles a computer screen, where they can browse products. A text message tells them when a fitting room is ready. In the changing room, intelligent bar codes on the clothes she has chosen are magically ‘read’ by a touch screen mirror, and she can use the screen to request different sizes or additional items and browse the online catalog.

Macy’s is testing an app called Macy’s Go that lets customers check whether sizes are in stock then sends the product to them via a chute in the fitting room. If they need another size, they tap a screen to request it. Hointer, the Seattle-based company that developed the technology for Macy’s Go, goes a step further with its store and even eliminates the need for staff (see below).

4. Help me/don’t help me

When beauty chain Sephora started up its Beauty Studio to shoppers, including makeover and beauty classes, they were a hit. Then when it tried a nail studio, it failed. “She didn’t want to be told what to put on her nails,” says Calvin McDonald, President & CEO of Sephora, of the fickle millennial consumer.

Lately the chain tried to help customers digitally, with the mobile-only Pocket Contour Class. This personalized tutorial gives contouring tips individualized to a person’s face shape. Also in the works at Sephora is a Nail Studio. Will it or won’t it fly? With our Gen Y shoppers, all bets are off. Perhaps that’s why Calvin says there’s a “never-stop culture” and “Fight Club” mentality at Sephora. “We never stop innovating. We’re constantly balancing between what are we evolving and what are we going to revolutionize?”

5. Look, no clothes (and no people)

Hointer, which developed Macy’s Go, has its own brick-and-mortar clothing store in Seattle that’s stripped back to barely any items at all. Customers use Hointer’s app, scan a single display item, the clothes appear via chutes in the fitting room, customers swipe their card on a tablet to pay, and walk out.

“After years of building Amazon’s experience and after three years of working in my own brick-and-mortar stores, I’m convinced it’s the way of the future,” says Nadia Shouraboura, Hointer founder and CEO. “When customers know exactly what they want to buy, it’s hard to beat the online experience of ‘click and you are done’. But when  it comes to products you want to touch and try on, a re-invented in-store experience will make online shopping feel hollow and pathetic in comparison.”

She says she is “experimenting” with her single brick-and-mortar store, and in the meantime she’s licensing her technology to other retailers.

* To find out more about the Terry J. Lundgren Center for Retailing and the Global Retailing Conference, visit terryjlundgrencenter.org