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Pity the Paper Napkin: Millennials are Reshaping U.S. Economy

Your new customers are not the same as your old customers, and they could bankrupt your business.

For generations, retailers have known that those in the 18-34 age group are the big spenders. They are moving away from their parents, building careers, buying homes and starting families. They've got a lot of predictable expenses, and many companies built fortunes meeting those needs.

But the current market segment, the millennial generation, is different. And many retailers are going bankrupt as a result.

The biggest difference is that millennials do not remember a time without the internet or mobile phones. Telecommunications have changed their world view and shaped their shopping habits. Many of them came of age during the Great Recession, with enormous student debt, making them more like their Great Depression-tested elders than their parents.

Millennials spend more on groceries and gasoline than older Americans, according to data collected by, which analyzes spending patterns. They also want products that offer value more than convenience, according to a study by investment bank Goldman Sachs.

The best example is that millennials who are parents have shunned packaged baby food, choosing to make their own for less money. This generation has learned that prepared foods often include additives and preservatives that could cause health problems down the road.

The Washington Post reported last year that millennials also are shunning expensive paper napkins at the dinner table and using much cheaper paper towels or cloth instead. If given a choice of spending cash on a ride-hailing service or new clothing, the ride wins almost every time.

These trends are having an impact. According to paper napkin-maker Georgia-Pacific, 6 of 10 households bought paper napkins on a regular basis 15 years ago. Today it's 4 of 10.

Better understood is the millennial preference for experiences over possessions. They spend more on dining out, gourmet groceries and quality drinks than other age groups. They are more likely to buy gasoline to go out than knickknacks to put on a shelf.

And of course, they buy more from internet retailers than any other generation, and they are looking for the best price.

Retailers must adapt to deliver what this new customer wants. Brick-and-mortar stores need to offer a great experience in addition to great products. That can mean great customer experience or a carefully designed environment.

Producers of entertainment products, such as movies and television shows, can't rely on advertising or cable television subscriptions to cover costs. That means moving toward subscription services like Netflix and Hulu where customers pay for entertainment on demand, not on a printed schedule.

The repercussions are far reaching for many industries, such as broadcast television and department stores. Some will be wiped out as millennial spending power outstrips that of the baby boomers by 2020.

The difficult challenge is dealing with this bridge era, when baby boomers want traditional retail services while millennials are rejecting them. This is the time when a retailer's mettle will be truly tested.

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