Millennials' Next Disruption: Grocery Stores

The age-old adage "build it and they will come" may no longer apply to many retail companies -- at least not for the millennial generation.

To millennials (people born between 1980 and 1996), brick-and-mortar stores are not enough. Grocery stores, in particular, can expect continued revenue declines until they cater to millennials' unique behaviors and desires.

For example, Gallup analysts have observed that millennials want faster, more efficient ways of purchasing grocery products -- while still paying less and maintaining healthy lifestyles.

Fewer Millennials Are Spending More on Groceries

The trouble lies with millennials' spending habits, or lack thereof: According to Gallup's report How Millennials Want to Work and Live, while 58% of people in other generations say they spend more on groceries now than they did a year ago, fewer millennials (52%) say they do this.

Further, between 2008 and 2015, daily spending among 19- to 35-year-olds has decreased by $13 per day. Considering the number of millennial consumers in the U.S., this amounts to a spending shortage of approximately $949 million per day.

Millennials' low consumer spending is one symptom of poor customer engagement. Just 25% of millennials are engaged customers, compared with 28% of Gen Xers, 33% of baby boomers and 38% of traditionalists. This makes millennials the least engaged generation of customers.

What Gallup Knows About Millennials' Consumer Behavior

Before retail companies -- particularly those in the U.S. -- can remedy these alarming trends, they need to better understand millennials' consumer tendencies.

U.S. shoppers use a variety of methods to save and spend money. Here's what millennials tend to do:

Skip coupons. Though coupon usage has declined across the board over the past year, millennials rank the lowest in coupon use, trailing other generations by five percentage points.

Save money on groceries (for future impulse buys). Gallup analysts have observed that millennials are more likely to purchase generic and store-brand goods than are older generations. Moreover, millennials do their homework; over the past year, the percentage of millennials comparing prices and deals online has increased considerably, but the percentage of those from older generations doing so has remained largely unchanged. However, millennials are also more likely to make impulse purchases and to go shopping for fun compared with those from other generations.

Shop and share online. Millennials shop online for retail needs more than any other generation, according to The Wall Street Journal. With smartphones always on hand, millennials are constantly connected to their digital networks -- readily sharing both positive and negative retail experiences via social media.

Stick to convenience. Gallup analysts have observed that millennial consumers focus on convenience and ease of doing business. As avid multitaskers, millennials prefer retailers that empower their busy lifestyles.

What Grocery Stores Should Do

With straightforward interventions, grocery stores can, in fact, appeal to millennials' unique needs, enhance customer engagement and increase consumer spending. Here are three best practices Gallup recommends:

Review and revise loyalty program initiatives. Let's be honest: Millennials are not likely to clip coupons from the Sunday paper. Tech-savvy millennials -- and even some older customers -- primarily research products and access news online, so companies need to adapt accordingly.

To start, leaders should review their loyalty programs, ensuring that they tailor these initiatives to the right audience. With data-driven tactics, organizations can unearth critical insights such as millennials' shopping habits and participation in loyalty programs and how loyalty programs influence their purchase behavior.

Then, companies need to strategically adjust their loyalty programs to attract and retain millennials with discounts and improve brand advocacy with engaging, affordable shopping experiences.

Audit digital experiences. More than ever, retail companies need agile, compelling digital presences. Factors such as ease of navigation and consistency matter to millennials.

Companies should ensure their digital presences bolster their brands and engage millennials. Websites, mobile apps and in-store experiences should all seamlessly align. A streamlined approach to shopping will draw and retain millennial consumers -- as long as prices are competitive.

Companies could also leverage technology to showcase organic and local options. For example, attract millennial shoppers by using location services on a mobile app to show a store's local produce suppliers.

Empower local managers to foster community engagement. Local managers are uniquely positioned to discover and fulfill community shoppers' needs and desires. Companies need to equip managers to develop marketing events and offerings that appeal to local millennials. In some communities, intramural sports promotions might attract millennial customers; in others, complimentary cooking classes may entice customers.

Companies should provide managers with local-level autonomy -- backed with training, structured support and ideas -- to help stores attract millennials and enhance their shopping experiences.

Bailey Nelson contributed to this article.