In 1960, the average first-time buyer was just 23 years old, paying a deposit of £595 on their first home. Fast forward to 2019 and first time buyers are now 30 years old paying an average deposit of around £20,000. Soaring house prices in comparison to the average wages of young adults means the millennial generation are struggling to get a firm footing on the property ladder.
Within this sector of “renty-somethings” some individuals lack the resources to raise capital for their deposit, however for others, renting is a conscious choice. They rent for short term convenience in order to facilitate a mobile lifestyle, the potential opportunity of relocating abroad or changing cities for work means they have no desire to take-on the financial commitments or responsibility of owning a home. Instead, they choose to spend their leftover income on a better lifestyle. A recent CBRE study found that millennials spend almost 50% of all disposable income on leisure – going out, non-food shopping and other non-essential items.
Renting a furnished property can limit interior design choices, meaning Generation Rent might be less likely to splurge on traditional big-ticket furniture. However, a rise of aspirational interiors cropping up on social media feeds has driven this demographic to get creative with their space. Carefully selecting interiors to create the perfect “Instagram Home” which reflects their personality. “If you look at social media and the influence of Instagram, there is an increasing focus on talking about the space we live in, even for those living in shared accommodation, we want our homes to be beautiful and reflect who we are” – Gina Coladangelo, Head of Marketing at Oliver Bonas.
This growing demand for affordable, aspirational interiors means Generation Rent are also shaking up the homewares market and offering new opportunities for fashion retailers. “Like fashion, interiors are a way to express personality and style” – Camilla Henriksson, Head of Marketing at H&M Home. 2018 saw several high street fashion retailers introduce their debut own-brand homeware collections, the likes of ASOS, New Look and H&M Home now sit alongside the already well established Primark, Next & ZARA Homeware ranges.
Millennials are the first truly digital natives. Rather than having to adapt, they grew up alongside the internet, and understandably it has had a large influence on how they shop. Today they make more than 54% of their purchases online as there is greater opportunity for savings and convenience. Likewise through subscriptions to online accounts whether it’s fashion, recipe boxes or Amazon Prime, they are sent personalised marketing ad’s with discount codes persuading them to make additional (unplanned) purchases.
More recently a new service is swaying Millennials to go online as a host of retailers now offer “Buy Now Pay Later”. Swedish firm Klarna, who work with online retailers such as ASOS, Topshop and JD Sports will offer a pay later service of between 14-30 days. For cash strapped millennials this removes one of the biggest obstacles to online shopping – waiting for returns to be credited.
Another trend which has evolved with Generation Rent is the “Sharing Economy” set to be worth £255 billion by 2025, it allows today’s Millennials to enjoy the benefits of owning without the cost of buying. They have instant rental access to everything they need, including entertainment from Spotify or Netflix, city stays from AirBnB, designer clothes from FrontRow and even rentable pets from “BorrowMyDoggy”.
For these individuals ownership is no longer a priority, their biggest priority is having freedom to travel and not be burdened by too many assets. This growing trend has triggered some of the big furniture brands to move away from purely targeting homeowners and instead tap into the growing rental market. Furniture giant IKEA recently launched a range designed specifically for Millennial renters, consisting of customisable and versatile furniture in an array of colours for use indoor or outdoor. The intention was to help renters add personality to their homes whatever size or shape they may be.
Feather Furniture is another brand waking up to the opportunity the rental market presents. The subscription-based furniture company launched in the US last year with a mission to remove pain-points, cost and waste associated with renting a home. They offer a very reasonable service (approx. $150 per month for a full bedroom and living room set), and also allow residents to switch pieces for different styles each time they move.
Another driving force behind Millennials buying decisions is the environmental impact of their purchase. The new generation are more sustainability-conscious than their parents, and are eager to demonstrate this, 75% of millennials are willing to pay extra for sustainable products meaning retailers who can demonstrate their commitment to sustainability will benefit from positive social reach within this group.
It’s estimated that by 2025, millennials will represent 75% of the workforce, meaning their disposable income is on the rise. Their spending habits will become more influential with time, as will the drive for products and services that match their expectations as consumers. Retailers need to wake up to these trends if they want to stay competitive and reach out to their Millennial customer who inevitably holds all of the future purchasing power.