Debunking the Millennial Brand Preference Myth

Millennial shopping habits differ greatly from those of prior generations. But their apparel brand preferences? Not as much as one might think.

After arriving home last month from college, Jake Thomas (not his real name) spent the next few days doing what any young man emerging from a fortnight of final exams and papers would do: He slept until noon; ate enough home-cooked food to make up for a semester of dining-hall fare; and spent eight hours a day on social media and Netflix binges.

Then, when he realized his summer wardrobe needed sprucing up, he didn’t grab his MacBook Air and tap into next-gen websites like Everlane and Revolve. He instead headed to a strip mall shopping center near his suburban New York home.

Jake takes his wardrobe and appearance seriously, and can arguably wear any brand he chooses with his generous monthly allowance. His store of choice? “I like to shop in Kohl’s,” said the 20-year-old matter-of-factly. “The stores are easy to get around in, and have a big selection of brands I like to wear, like Levi’s, Nike, Under Armour and Hanes. These brands know what they’re doing. And the prices and sales are fantastic.”

Jake’s preference should come as no surprise, according to a recent Goldman Sachs report co-authored by Lindsay Drucker-Mann, Jason English, Heath Terry, Matthew Fassler, and Richard Evans examining U.S. millennial brand and retailer affinity.

The report was based on a survey conducted in collaboration with fashion publisher Condé Nast that examined millennial brand and store favorites across a broad range of fashion categories. It turns out that Kohl’s, despite its recent stumbles, is actually the favorite retailer of millennial women and the number-three favorite among young men, after Amazon and Macy’s.

Economic Gain, Retail Pain

It’s no mystery that the relatively healthy macroeconomic backdrop is not translating to growth at retail where a tremendous secular (rather than cyclical) upheaval is underway thanks to the new shopping platforms, channels, payment options, and other developments disrupting the sector.

It’s also no secret that millennials, consumers roughly between the ages of 18 and 35, are the most important demographic group impacting apparel and other style-driven markets today. Although they control only about a quarter of all dollars spent in fashion categories, their spending is expected to increase almost 40 percent in real terms over the next 15 years as they approach their peak spending years. Their unique approach to consumption, with focus on technology, value, convenience, experience over stuff, authenticity, and transparency are by now the stuff of legend. But the widely held notion that younger consumers want no part of traditional retail brands or channels is an overly simplistic one according to the study findings. Millennial consumers, it turns out, have a penchant for many of the same stores and brands as their older GenX and Baby Boomer cohorts, a fact that could have major strategic implications for both next-gen and traditional retailers.

Understanding the reasons for this, as well as for the meteoric rise of some newer next-gen players that seem to be launching on an almost weekly basis, and figuring out how to adapt to the demands of this consumer, will help traditional retailers capitalize on the opportunities available to them in the new retail landscape.

Millennials Shifting Clothing Shopping to Online

If Jake’s older sister, whom we’ll call Maggie, had her way, she’d never have to set foot in a physical store. When not working at her chemical engineering job, she can be found curled up with a book or cycling on the roads near her Houston home. Her go-to retailers are e-commerce sites Amazon, JCrew.com and Zappos. She recently discovered and immediately fell in love with resale app Poshmark. For immediate needs, she often heads to her local H&M or Old Navy.

“The money I don’t waste on clothing and footwear goes into savings and my travel fund,” said the 25-year-old, who plans take a two-month leave from her job next year to tour the world.

One of the most dramatic findings revealed in the Goldman Sachs/Condé Nast report is the rapid rate at which fashion shopping is moving online. A large proportion of younger consumers spend most of their money on fashion categories in e-commerce channels, with clothing the highest penetration.

Though many in the industry are suffering from a condition that has come to be called “Amazon Denial,” the online giant is the key fashion player today, and the only retailer that turned up in the study’s top-10 favorites in every fashion category examined. For men, it is the number one or two across every category. Many millennials, like Maggie, use Amazon as a shopping app or marketplace, an online mall from which they purchase their favorite third-party brands, sometimes at premium prices.

But Amazon has its sights set on dominating fashion in its own right. Goldman Sachs estimates it will start small, leverage third-party sellers, then scale to attract brands into the fold. Amazon’s continued progress in apparel will mirror its steady march forward in other categories like media and electronics. Last year the e-commerce giant quietly launched seven private label brands in addition to courting more wholesale brands to work directly with. Not coincidentally, it became the favorite shopping app for millennials.

Fashion-Conscious Women

Maggie’s college classmate, let’s call her Melissa Block, a management consultant based in Columbus, Ohio, prefers a combination of online and offline shopping. She shops for clothes for work at off-price and designer outlet stores, but prefers websites like Asos, eBay and Gilt for her workout, casual and going-out clothes. She has been shopping more at Zara, loves the Canadian brand Aritzia, and makes frequent stops at the sale rack at Lululemon.

“I need to look professional at my job, so brands like Tory Burch and Kate Spade are a good investment, even though they’re not really my personal style. For weekends, I don’t want to overspend on clothes that I’ll be sick of in six months.”

She paused and then admitted: “I also don’t want to be seen too many times in the same outfit on Instagram.”

Melissa falls into the category the study calls “It Girls,” fashion-conscious millennial women with stronger ties to brick-and-mortar retail than the average millennial. Even though she’s also shifting her purchases online, Melissa spends proportionally more in physical stores than her less fashion-conscious counterparts. She also places more emphasis on in-store experience details like service, curation and in-store events. For fashion inspiration, she turns to her social media network of friends and bloggers. She sends dressing room photos to friends and family via snapchat to elicit feedback before making a crucial apparel purchase.

When she feels an outfit has overstayed its welcome in her closet, she posts in for sale on Ebay or Poshmark.

“It Girls” tend to be more affluent, but are also the most value-conscious group among millennials, more often looking to limit spending or seeking deals like cash back and coupons. Like Melissa, this consumer is driving the growth in pre-owned marketplaces like Mercari, direct-from-factory buying such as Wish, and the use of shopping apps to do more research ahead of purchase.

The favorite “It Girl” brands based on brand affinity and favorability ratings are Victoria’s Secret, followed by Nike, Coach, Kate Spade, Michael Kors and Lululemon.

If “It Girls” are the leading indicators to more broad-based millennial female behavior, we can expect these brands, marketplaces and platforms to have plenty of room for future growth.

Importance of Physical Stores

Though physical retail has been challenged by the rise of online shopping, a decline in foot traffic, and closing of stores, the study found that the more invested in fashion a millennial consumer is, the more likely it is that he or she will shop in a physical store. Style-conscious consumers like Jake Thomas find that hands-on product engagement is the best way to ensure a flattering fit. Melissa likes the personal service afforded by a brick-and-mortar store. These consumers value brands, curation and promotions, and prefer deal over convenience. But that physical store must offer a superior shopping experience.

The favorite millennial clothing retailers identified by the study include Forever 21, Nordstrom, H&M, Macy’s, Kohl’s, Walmart and J.Crew. Increasingly, consumers also like to shop from the brands themselves, with Nike a particularly dominant retailer.

Millennials also tend to be open-minded and early adopters regarding shopping channels. When asked about her favorite purchase ever, Melissa Block answered without hesitation: “A Chanel bag that I found at an estate sale: $20. I was shaking as I handed the money to the woman. She must have thought it was a fake, but I Googled it and knew it was real.”

Brand Affinity

Rumor has it that millennials are less into brands than their Gen-X predecessors were. And although this certainly applies to some brands, like Abercrombie & Fitch, whose sexually charged marketing and oversized-logo-merchandising missteps became too much for many young consumers, millennials love brands, and have their favorites, which they use to express their own personal style and values.

The study found that top brands among millennials include fast fashion and specialty brands such as Forever 21, Old Navy, H&M and Zara, established players like Coach, Kate Spade, and Michael Kors, and iconic names with increasing momentum such as Adidas, Nike, and Lululemon. Above all in the lingerie space is Victoria’s Secret, the brand that essentially defines intimate apparel in the U.S. market.

In addition, the report identified some important brands to watch, like subscription activewear site Fabletics and network sales-based LuLaRoe.

Not surprisingly, apparel is the most fragmented category in terms of consumer favorites. For men, Nike, Ralph Lauren, Levi’s, and Adidas were the most frequently cited as favorite brands, but only about a third of men in the study cite these brands as their favorites.

For women, Old Navy, Forever 21, American Eagle, Gap and H&M ranked highest among the clothing brands, again with only a third of women mentioning them. For “It Girls,” Zara replaced Gap in the top five.

Athletic Appeal

Millennials are an active generation, with workouts a part of their everyday routine. The importance of athletic apparel and footwear to this demographic cannot be overstated, and Nike reigns supreme as the number-one brand across all millennial sub-segments, with Under Armour, Lululemon, Adidas and Puma also significant.

Rising star Fabletics, a division of JustFab.com, and Victoria’s Secret Sport were also top-10 favorites of women, particularly among “It Girls.”

An interesting finding in the study is that Under Armour, though highly ranked in athletic apparel, is not a favorite footwear brand. Not only did it not appear in the top-ten favorite footwear brands for any of the millennial segments, it didn’t even show up in the top 20.

Implications and Opportunities

Retailers seeking ways to connect more deeply with millennials should focus on the more fashion-conscious among them. But they need to meet them on their own turf, with compelling brands, understandable pricing strategies, social media and blogger marketing, and an enhanced in-store experience. Despite the hefty cost, free shipping and returns are table stakes today. Many of the top-ten millennial retailers and brands, like Amazon, Victoria’s Secret, Nike, Kohl’s, JCPenney, Nordstrom and others, have a considerable runway for growth if they approach these consumers properly.

Established and up-and-coming apparel brands and retailers need to establish a presence on digital platforms such as Snapchat, Instagram and Pinterest. And, like it or not, retailers also need to develop an Amazon strategy, because that’s where a significant number of millennials want to shop.

Maggie Thomas says she’s had great success ordering national brands on Amazon and with the ease of ordering and returning via Prime and the great product suggestions the retailer “selects” for her, will probably start trying the private-label product as well.

Jake Thomas, who loves to get dressed up, but rarely has the occasion to do so, has a different perspective on the future. The college junior says he’s already thinking about where he will buy his first post-graduation suit. “I like Brooks Brothers a lot. Such a milestone deserves a splurge.”

Millennial Consumer as Agent of Change

Millennial consumers are being recognized beyond their large and growing wallet power for the influence they exert encouraging and enabling older Gen-Xers and Baby Boomers to adopt new shopping and lifestyle behaviors. In other words, millennials are not only shopping differently, they’re getting others to do so as well, creating a set of behaviors that serve as a benchmark for how overall consumption is trending and will evolve in the future.

This dynamic of the millennial as an agent of change is manifesting itself across a wide swath of shopping, consumption and social interaction behaviors. And these consumers are not only disruptive but also still emerging.

In other words, we haven’t even begun to see the impact.