Millennials v Grey Pound: Who holds the key to future retail success?

The KPMG/Ipsos Retail Think Tank has published a white paper on the type of customers retailers should be focusing on in order to drive growth.

Future retail success depends on retailers staying relevant to their customers. But, it’s been a long time since any single retailer managed to conquer the Herculean task of being able to attract all types of customer within one format.

So with retailers seemingly no longer able to attract all types of customer, where should they focus their efforts in order to drive growth?

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The KPMG/Ipsos Retail Think Tank (RTT) met with its members earlier this year to discuss the future of retail success and whether it is Millennials or the Grey Pound that will be the key to future retail success.

Grey Pound – the upsides

In considering this question, a number of the RTT members agreed that focusing on the Grey Pound offers retailers a variety of opportunities for retail growth, particularly in the near-term.

Most fundamentally, the Grey Pound is effectively bigger than the ‘Millennial Pound’.

Maureen Hinton, a group research director at Verdict Retail said: “There are more people aged 65+ in the UK population than 16-24 year olds, so the total spend is much greater; in clothing £6.7bn against £6.1bn.”

This generation is also far more likely to enjoy generous final salary pension schemes when they retire.

As such, structural issues in the economy mean that a substantial amount of the country’s wealth is concentrated among the older generation, particularly due to the rise in the value of their homes, according to Martin Newman, CEO of Practicology, a multichannel consultant.

The Grey Pound is not just a bigger representation of the population in actual terms. Jonathan De Mello, head of retail consultancy Harper Dennis Hobbs, pointed out that “this generation has greater levels of disposable spend and, in the short term, the ‘Greys’ represent the most considerable untapped opportunity – and retailers would do well to focus more product lines – and marketing – on them specifically.”

But what are the downsides?

The main problem with going after the ‘silver surfers’ is not an issue of the amount of money they have to spend, but more what they are choosing to spend that money on.

Dr Tim Denison, director of Retail Intelligence at Ipsos Retail Performance said: “Health products and home maintenance are the only two categories in which the senior consumer spends more per person than the average UK household.”

Martin Hayward, founder of Hayward Strategy and Futures also noted that “older customers do eventually stop spending and any retailer’s customer pot will be diminished if new younger customers aren’t brought in to
replace them.”

“This is currently under debate with Marks and Spencer’s clothing business which many believe to be focussed too much towards the older loyalists at the expense of younger customers who do tend to spend more on fashion,” he added.

However, Maureen Hinton highlighted that targeting the Grey Pound, specifically in clothing, is not that easy when you take into consideration the fact that there are essentially two distinct generations in this age group: the post-war ‘Baby Boomers’ and their parents.

“The Baby Boomers have been avid consumers since the 1960s, unlike their parents who have a more austere attitude to spending, and therefore tailoring a proposition that satisfies both is a tough challenge,” she said.
So how do retailers win and keep a share of the Grey Pound?

Jonathan De Mello pointed out that “whilst traditional Millennial marketing might not resonate as strongly with the older generations, they certainly do not feel old, or want to be marketed or sold products in a way that makes them feel old.

“Greys are increasingly technology savvy, with nearly 90% shopping online using a laptop, and circa 50% owning and using a tablet for shopping online. Many are also on Facebook and other social media channels, so the perception that online media cannot reach them is a fallacy,” he added.

Millennials: What are the upsides?

So while there are pros and some cons to putting too much focus on the Grey Pound, other RTT members considered the potential boon of focusing on growing share of Millennials spend to drive retail growth.

“Looking at the Millennials, they are having a profoundly disruptive influence on the retail industry,” said David McCorquodale, UK head of Retail at KPMG. “The disruption is caused not only by their sheer spending power – they are the biggest generation in history – but also by the way they buy. Only 1% of them are influenced by advertising, but a third consult a blog or peer review before making a purchase.”

In sectors such as fashion, for example, Millennials spend more on themselves than the over 65s. Hinton pointed to Verdict’s research, “which shows 16-24 years spend on average £826 per head per annum on clothes while the 65+s spend £565 per annum.”

Yet, according to Mike Watkins, head of Retail an Business Insight at Nielsen UK, “the most compelling reason for a retailer to capture the lifetime loyalty of Millennials is that in the next 10 to 20 years, female Millennials will become the driver of retail spend. Even within consumer goods shopping, women account for 70% of spend and female Millennials will only become more important shoppers in terms of income available to spend.

Ultimately, retailers need to embrace Millennials in order to grow sales in the next two decades because if they choose not to, then they are at risk of losing the consumers of tomorrow.

But what are the downsides?

In contrast, James Knightley, a senior global economist at ING, pointed out that much of the analysis regarding Millennials has focused on their struggles.

“Burdened by student debt, high housing rents and faced with a more challenging jobs market than many before them, they are less financially secure,” he said.

De Mello added that many Millennials have also had to rely on their parents (the Greys!) for financial support.
So does it really make sense for retailers to pin their hopes on this demographic in order to drive future growth?

McCorquodale said: “Millennials can be volatile and are likely to shun brands with bad stories…[while] the silver surfers come from a generation that have loyalty, adapt slowly to change, like social interaction when shopping and perhaps are tolerable to a drop in standards.”

Yet Denison commented that despite this, “it’s the fast-living, younger shoppers that retailers rely on to keep the tills ringing from the fashion stores through to the value chains. It’s why so much investment is being sunk into providing an omni-channel service that speaks to the digital native and meets their anywhere, anytime, anyhow shopping habits.”

So how do retailers win and keep a share of Millennial spend?

Key to this is the “sharing economy” which provides access to products and experiences without the burden of ownership. McCorquodale said: “Millennials are not necessarily consumers in the same way that their parents are.

You only have to look at how they subscribe for music and books rather than buy – they will rent, not own; share, not hire.”

Knightley added: “In terms of the Millennials’ retail experience, technology is a very important factor in how they shop. The use of price comparisons, the ability to get more product information and a greater focus on reviews means that they are more knowledgeable on products and arguably more demanding.”

Therefore, to win with the Millennials, retailers need to use analytics tools to filter the information provided and the show that they are listening because Millennials ultimately feel loyal to a brand if they feel the brand is trying to give them something that adds value to them.

Is it possible to win at both with both generations?

While there are ways of targeting consumers within different generations in order drive growth, the RTT also discussed whether it was possible to reach both silver surfers and Millennials.

The good news, according to Martin Newman, is what older customers want may well appeal to younger generations too, and vice versa. For example, new digital and mobile ways of allowing customers to buy from you, or interact with you, are likely to appeal to both ends of the spectrum.

“Retailers such as John Lewis and N Brown Group, who historically have had large older customer bases, are doing very well at selling via the web and mobile. This demonstrates that it’s not just the younger generation who benefit from the flexibility and choice that multichannel retail can deliver,” Newman said.

Does age determine spend?

Currently, there is much debate around whether demographic segmentation is in fact relevant anymore. When asked the question at the Retail Business Technology Expo conference last month, Dr Nicola Millard, a consumer futurologist at BT, stated that age was now one of the worst means on which to differentiate consumer behaviour.

Hayward added that “in today’s society, age, class, income and even gender are less indicative of behaviours and spending patterns than they have ever been. The old are trying to be young, the ‘poor’ aspire to designer lifestyles.”

As such, Denison suggested that it is “physical and societal events during one’s formative years which create personal values that remain relatively stable through time and which shape our expectations and behaviour.”

It is these commonalities and shared experiences within generations that are relevant to retail marketers and may help provide some insights into targeting consumers within different generations in order drive future growth.


The RTT concluded that retail growth is not going to come from focusing on winning share of spend in either the Grey Pound or the Millennials.

McCorquodale said: “Future retail success must lie in being able to adapt to the millennial way whilst making this change appear only an evolution, rather than revolution, to the silver surfers. Agility would appear to be the key as the demands of the Millennials change more regularly; and also transfer with ease to the silver surfer. This is the area where success can be won or lost.”

But what does future retail success look like? It depends whether you take a long or short term view on growth.

Hinton suggested that while knowing what drives the current Grey Pound is useful in the short term, in the long term this generation will be replaced. Therefore, understanding Millennials with their digital lifestyles and new attitudes to spending will provide the key to retail spending over the longer term.

Added to this, Denison commented that while “Millennials may be entering their peak earning years, with GDP per capita growth on the decline and consumer spending slowing, they won’t be as rewarding and loyal a customer-base as their parents were at the same stage in their lives.” Therefore it may well be that it is the generation behind the Millennials with new demands and new traits that hold the key to future retail growth.

So does the question then become focused on Generation Z and maybe even the children of the Millennials, who will no doubt demand, shop, and spend in whole new ways? If this is the case, agility will be even more key and retail success will come from those retailers who adapt to thrive and remain relevant to
their customers.



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