As one of the largest generation in history, the future of the global consumer market will be directed towards millennials
Most often either when you’re out or scrolling through social media, you notice young adults dressed in designer clothing and bags. You see these globally spread out heavy-spenders, a majority of which are from Asia. They belong to a group of generation called millennials. According to Euromonitor, millennials are the largest generation in our world today, taking up approximately 35% of the total global population, born between the early 1980s to late 1990s. As of 2017, the millennial age spans between 21 to 30 years old. As one of the largest generation in history, the future of the global consumer market will be directed towards millennials. However, you can’t possibly generalise a whole generation as one. Despite sharing similarities of behavior and preferences, there are notable differences if you compare the market studies of millennials across the globe. Millennials from North America and Latin America are different, and so are Asian millennials with African and European millennials. The contrasting difference is derived from their spending patterns. But before we discuss the differences, there are four notable similarities among three groups of millennials:
Delaying Marriage
According to Goldman Sachs Investment Research, the average millennial marries at the age of 30. This is a huge difference as compared to the previous generation whose average age of marriage is 24.
Buying a Home? Maybe Later
Despite some millennials aspiration to live on their own, a survey from CBRE reveals that 63% of millennials in the Asia-Pacific region opt to live with their parents. The rate of American millennials who opt to live with their parents has also been constantly increasing since 2001, according to the Goldman Sachs Global Investment Research.
Sharing is Caring
Millennials opt to share sets of services rather than owning it. In fact, millennials in the Asia-Pacific region were more likely to use sharing economy (such as Uber, Grab) according to the Nielsen Global Survey in 2014. American millennials share the same behavior, removing the burden and ownership, opting to share products or services instead.
Living Life to its Fullest
Most millennials aim to live their life to the fullest. In general, millennials are those who seek experiences out. Therefore, those who offer experiences in their product or service will often win the hearts of millennials.
Millennials aspire to live their life to the fullest, and for most Asian millennials, this translates to stretching their maximum willingness to pay for things that glitter.
One data from the Euromonitor shows that 3 out of the 5 top millennial population come from Asian countries such as China, India and Indonesia. According to A.T. Kearney, 58% of the globe’s millennials lives in Asia, making Asian millennials lead the global consumer market. Therefore, this article will focus on Asian millennials and how their behaviors affect their spending patterns. Delaying marriage, purchase of property and cars show that Asian millennials are able to spend their money on something else, goods and experiences. Data taken from Warc shows that the increase of real wage in Asia is higher than the rest of the globe (4.2% compared to 2.4%), this suggests the cause behind the increase in the spending of Asian Millennials.
Millennials aspire to live their life to the fullest, and for most Asian millennials, this translates to stretching their maximum willingness to pay for things that glitter. They spend huge sums of money on luxurious goods and services. Another thing about Asian millennials is that they spend more money on foods and drinks as compared to the Baby Boomer generation. Several studies suggest luxury travel or hospitality businesses, along with businesses producing luxurious goods and services, to focus on Asian millennials as their target market.
Millennials in Asia spend heavily on luxury goods. Mastercard revealed that the millennials in China are the biggest spender of luxury goods in Asia-Pacific, followed by South Korea and Hong Kong. Luxurious goods are divided into three categories: 1. High-end Gadgets, 2. Designer Clothes & Goods and 3. Jewellery. High-end gadget sales make the most out of the luxury goods category with 66%, both designer clothes & goods and jewellery have a 17% rate each.
Whilst the average European millennial spends less each day on luxury goods, Mastercard forecasted that Asian millennials spend more on luxury goods as of 2015. According to them, it only takes less than a month for 44% of Asian millennials to buy these said goods. Moreover, there are also groups of Asian Millennials who buys luxury goods impulsively. Indonesian (50%) and Thai (60%) millennials are the most impulsive buyers of luxury goods in the Asia-Pacific Region.
Asian millennials like to go out either with friends or family. They are selective with the food of their choosing, keeping in mind the price and looking for a cheaper option. A number of Asian millennials also value ‘Instagram-able’ or photogenic food. This causes a significant rise of the fast-casual restaurant concept across Asia. Fast-casual restaurants present aesthetically pleasing food and set of the restaurant in order for customers to deem the place ‘Instgram-able’. They also provide healthier alternatives from fast-food restaurants yet cheaper than casual dining, making fast-casual a sweet spot for Asian millennials.
In general, millennials value experiences over things. One survey from Agility Research in 2016 over 900 Millennials in China, India Hong Kong, Malaysia and South Korea reveals that 61% of them would like to have experience when sightseeing. In choosing their destinations, 77% of them agree that they would like to visit the places that offers new experiences and activities. One interview done by Forbes with CEO in hospitality industry argue that Millennials prefer to travel with their “tribes” a group of friends so that they were able to rent bigger accommodation during their trip which is large, spacious, and more luxurious.
30% of Asian Millennials are expected to run out of money by the time they reach retirement, whilst 40% of them will carry mortgage debts into their retirement years.
Spending lavishly on both goods and experiences, Asian millennials should be aware of their lifestyle’s long-term effect. A recent article from CNBC argues that Asian millennials are likely to face a tough future. The argument is based on a study from Manulife Investor Sentiment Index, who conducted 500 online interviews each in Hong Kong, China, Taiwan, Thailand, Singapore, Malaysia and the Philippines. They also had 500 face-to-face interviews in Indonesia. The study involves middle-class millennials who already have investment products.
The study found that 30% of this ‘financial-savvy’ group are expected to run out of money by the time they reach retirement, whilst 40% of them will carry mortgage debts into their retirement years. During the interview with CNBC, Roy Gori, president and CEO of Manulife Asia, described Asian millennials as a ‘sandwich generation’ whereby financial support should be provided for both their own children and parents, without knowing whether their children will provide them the same in the future.
From the interview with CNBC, Gori mentioned that Asians used to be recognised as cautious consumers, living with the lowest levels of debt. “Today, that is no longer true”, he said. As a ‘sandwich generation’, Asian millennials should rethink their luxurious lifestyle and be more aware of the financial uncertainties that they may face in the future.
On the other hand, there are other economic factors that Asian millennials should look at. For example, the weakening of the ringgit in Malaysia along with the increase in property prices would only mean burden for Malaysian millennials in the future.
In addition, Gori suggested that ‘traditional investment’ (purchasing of property and saving of money in the bank) would not be sufficient enough for Asian millennials and that they should focus on having a much more aggressive investment in equities.