Friday, June 10, 2016

Millennials and their Shopping Preferences

Somewhat interesting article on Bloomberg from the other day discussing millennials and their spending habits. Couple of excerpts:

Millennials have a higher “experience-to-stuff” ratio for their disposable income than members of the baby boomer and Gen X groups had when they were 24 to 35 years old, MetLife Investment Management said Thursday in a report.

Baby boomers and gen x'rs, as a general rule, were married and had a kid or two between 24-35. Millenials, however, are delaying household formation until their late 30's or 40's. A family of 4 consumes a lot more than a single adult. Families of 4 are going to have a tougher time finding enjoyable "experiences" for their whole family as well. As someone with a couple of kids, it's hard enough to corral everyone down to the park a mile away from our house--going to a trendy restaurant for an "experience" is simply out of the question.

I'd propose another reason millenials have a lot less "stuff" is because their "stuff" is just so darn cool. If you have a smartphone, laptop and an internet connection you have unlimited entertainment options. What else do you really need stuff-wise to be content in the modern world? Baby boomers and gen x'rs obviously didn't have access to these types of toys.

Still, shopping locations can thrive when consumers find an attractive mix of stores, restaurants and entertainment, said Melissa Reagen, head of research at MIM for real estate.

“We’re very bullish that those retail centers will actually do quite well,” she said in an interview. Places “that can do all those things really well will be able to compete against e-commerce.”

This is a pretty common theme in retail commercial real estate right now. The idea is that restaurants, grocery stores, and other retail uses that currently can't be replaced by a website will continue to do well. That's probably true for the short term, but if I had to bet money, I'd say in another 10 years no one will shop at grocery stores.

We'll probably be able to send our driver-less car to a warehouse, it'll stop at a window, and then a robot will gather all the groceries you ordered online and put them in your car. The care will then drive them to your house and you just go outside and grab them. That's just one technological advancement I could see wiping out the grocery store concept. The other is even more obvious--Amazon. I think it's entirely possible that in a few years you'll be able to place a grocery order on Amazon and a fleet of drones will deliver all the groceries within an hour.

The point is, technology is advancing so rapidly that even these supposed solid retail concepts will most likely face severe challenges sooner rather than later. The other point is invest in industrial real estate for the long term, not retail. Supply chains expansion driven by the constant need to be able to deliver goods faster is going to, I believe, create a huge demand for industrial for the foreseeable future.


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