Una Mullally: Generational shifts feed into decline of retail

Millennials underpin spending move from goods to experiences and services

“People in their 20s and 30s are facing situations that will have an impact on their consumer behaviour that previous generations didn’t.” Photograph: David Paul Morris/Bloomberg

“People in their 20s and 30s are facing situations that will have an impact on their consumer behaviour that previous generations didn’t.” Photograph: David Paul Morris/Bloomberg

 

As we rid ourselves of the final detritus of Christmas, the state of retail will be an ongoing topic for 2019. Before Christmas, dire warnings about retail were sounded.

These warnings are part of a three-pronged pattern.

The first part of the pattern is the broader story about the “decline of the high street” – a catch-all phrase for the drip-feed of stories and evidence about how traditional (and some not so traditional, such as shopping centres) shopping areas are waning, hit by austerity, online shopping, depressed town centres circumnavigated by shopping centres on their outskirts, and other economic trends and factors such as busted gentrification and overpriced retail rents and leases.

Stories that can be catalogued under the theme “the decline of the high street” range from depressed British towns and failing American suburban malls

The second part is also contextual: the nervousness about how Brexit will have an impact on, well, everything, in Britain and Ireland; and more broadly, the niggling worries about a global downturn.

The third part is about the consumer, and the increasingly mooted idea that we have reached “peak stuff”.

Retail’s vicious cycle of discounting is also coming home to roost. You’d imagine European retailers are ruing the day America’s consumerist splurge, Black Friday, leaped across the Atlantic.

It distorts sales and profits before Christmas, and leads to an expectation among consumers that things should be on sale before Christmas as much as after, which is now the norm.

Interestingly, one retailer that does not discount things before Christmas, Next, reported a growth in sales of 1.5 per cent in November and December. 

Existential crisis

Stories that can be catalogued under the theme “the decline of the high street” range from depressed British towns and failing American suburban malls, major retail names having serious financial issues and much-loved shops going to the wall.

This theme is to consumerism what climate change is to the environment: an existential crisis that we’ve been told about for so long that it’s hard to grasp, until the results start to appear right in front of you.

The most shuddering of those results was the most unexpected. Asos’s profit warning in December saw its shares crash by 38 per cent, setting off a contagion that spread to others, such as Boohoo.

There’s also a feeling that’s harder to pin down, and that’s the sense that people want less crap in their lives

While we have come to expect high-street stalwarts to be the ones struggling, Asos, which offers thousands of new products a week, responds with lightning speed to trends and uses social media to drive its sales, is the poster child of a dynamic, online fashion company that should be leading the pack, not limping.

What happened before Christmas was seen as shocking for the company, but in June 2014 Asos’s shares fell 31 per cent when it issued a profit warning then. These companies aren’t as stable as we’d like to think. If a third of a company’s value can be wiped off in an afternoon, did that value ever really exist?

If we perceive that the main issue of struggling retailers – Sears, House of Fraser, Clerys, Debenhams – is that they can’t keep up with the times, why is a company that does just that struggling?

Along with all of economic factors at play, there are also behavioural ones that are getting less attention, which brings us back to “peak stuff”.

While millennial spending power is strong, it is also different. What other trends are having an effect on retail?

What about the backlash to fast fashion, saving for quality luxury items over multiple cheaper items, a reduction in the amount being spent per day (a Gallup poll in the US last year found that people aged between 18 and 29 are spending $20 less a day than their counterparts did a decade ago), the shift from materialism to experiences (and the role of social media in driving this), the impact job insecurity has on shopping, how rising rents eat away at disposable income, and so on? 

Product launches

While new products created excitement when they first came on the market, the apathy towards “product launches” from companies such as Apple is pronounced. Apple revising its earnings by 5 per cent, which was then reflected in a 10 per cent drop in its share price last week, shows that the massive iPhone sales it enjoyed for years are no more.

Peak stuff.

How many iPhones are you conceivably going to buy in a three-year period? Is it any wonder that ebook reader sales are falling, for example? How many Kindles are you going to buy in a five-year period?

Once you have one, you have one. Digital book sales are also falling, by the way, while hardcopy book sales have enjoyed their fourth yearly increase in Britain, with audiobook sales the fastest-growing area in publishing.

People in their 20s and 30s are also facing situations that will have an impact on their consumer behaviour that previous generations didn’t. With more young people here forced to live in their family home due to impossibly high rents, I’d love to see a chart examining the changing average age various household items are purchased at.

If you’re not moving out, you have no cause to buy a fridge, a microwave, a washing machine. Spend on services counters what would have been spent on a product – Netflix over a television, Spotify over a physical music player, and so on.

There’s also a feeling that’s harder to pin down, and that’s the sense that people want less crap in their lives. As people settle down to watch Marie Kondo on Netflix, the growth in mindfulness and environmentally conscious, anti-materialistic behaviour as a reaction to hyper-consumerism may begin to make everything a harder sell.

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