The millennial consumer is still something of an enigma to the corporate world, but clichés regarding the demographic are well known. Considered flighty and non-committal, home ownership rates for millennials are dropping, the average age of marriage is rising, and the generation is travelling more than their elders did. One thing that businesses are sure of is the importance of capturing the market share of this divisive generation, which is due to account for three-quarters of the US workforce by 2030.
The private investment sector has its sights set on the 2bn-strong demographic, which will inevitably grow into the dominant base of wealth as earlier generations retire. But capturing the tastes of this group is also fundamental to crafting profitable investment products, and various funds have been created to specifically target ‘millennial-friendly’ companies. The Indxx Millennials Thematic index is designed to track the performance of companies that cater to this generation, and when compared to the S&P500, it has shown to consistently outperform the more traditional index in the previous 2+ years.
But are millennially-focused companies a good credit prospect? Credit Benchmark, using consensus credit data collected from leading financial institutions, have created an index of US- and UK-based businesses that cater to youthful consumers. Included in the sample are well-known apparel retailers, food and beverage providers, social media and tech companies, and travel industry brands. We have contrasted this index with a comparative representative sample of US500 companies.
While both indices have seen deterioration in the past 2-3 years, the millennially-focused group has seen a much deeper drop and a more turbulent overall trend than the traditional companies.
With an obvious disparity at play, are businesses unwise to devote marketing spend on capturing the minds and wallets of young consumers?
And what are the social and economic factors contributing to the lacklustre credit performance of millennial-friendly companies?