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Winning the Hearts–and Loyalty–of Younger Consumers

BY Shannon Andrick

Alliance Data’s 2018 “Rules of NextGen Loyalty”  study validates an emerging trend happening with today’s younger consumers: Not only are they financially conscious, they’re also heavily influenced by cost when it comes to purchasing decisions. These new findings build on our 2017 study, “The Generational Perspective,” which looked at all generations, and found that Millennials, as compared to Gen X, Baby Boomers, and the Silent Generation, were most likely to prioritize their budgets when making purchasing decisions. Initially, we thought this was due to life stage, but our recent study proved there is a bigger underlying cause and effect that is shifting how younger consumers shop.

Obviously, price is a factor with all consumers. It’s even more important to today’s younger consumers, but not for the reasons you might think. Our loyalty study further reinforced that today’s younger consumers are feeling a financial strain and may be struggling to balance price and quality, which is influencing their views on brand loyalty. The data also revealed that these consumers are focused on coupons, discounting, and rewards. In fact, 66% say they’ll seek out a discount or coupon prior to purchase. Even with the financial challenges they face heightening their focus on price, loyalty is not lost.

The difference a decade makes
These two Alliance Data studies have shown that younger consumers are price conscious. Digging deeper, a more challenging financial picture comes into focus. Purchasing influencers over the last 10 years have been driving younger consumers to a deeper evaluation of price and value, forcing concessions on what, where, and how they spend. It’s changing their spending habits, brand relationships, and views on brand loyalty.

Flash back 10 years and the U.S. was in the throes of an economic recession. While older consumers have largely recovered, the effects have lingered for younger consumers. Starting out in life now means younger consumers must consider every purchase decision before it’s made. Personal income has increased only nominally for this age group, while fixed expenses continue to soar. Rent and healthcare costs also have steadily increased over the last 10 years. Combine this with education and tuition costs, as well as student loans, and you can see why it might be difficult for younger consumers to build equity or buy a home. Not to mention, Baby Boomers are working longer and retiring later, making it much harder to climb the corporate ladder.

The collective impact of younger consumers’ financial situations means greater importance is placed on their wallet, which comes as no surprise, given 45% of younger consumers say they never have enough money to buy what they want. Data from our recent Loyalty Study also shows that in the last 12 months, only 5% of younger consumers have achieved financial independence, just 5% have purchased a home, and only three percent have paid off school loans. Even with the financial considerations younger consumers must make, it doesn’t mean they have stopped shopping or consuming products and services.

In fact, data shows that younger consumers are actively applying for credit and using it to get the products they want and need. With so much for younger consumers to consider, it is even more important for brands to intimately understand the consumer-brand relationship and, more importantly, what this means for driving brand loyalty.

Loyalty looks different
Dealing with inflated costs in almost every aspect of life, younger consumers are likely faced with daily choices when it comes to buying what they need, let alone what they want. For some, splurging on extras might require stretching their budgets with coupons, discounts, and rewards.

For the younger consumer, making concessions and questioning when price outweighs quality are part of the daily routine. In some instances, it means placing priority on price over brand or product. Even so, loyalty is not lost. It may just look a little different for the younger consumer.

In this day and age, brands face greater scrutiny and have far fewer opportunities to “get it right.” Younger consumers don’t seem to be splurging as often but, when they do, they want and expect more from brands. Great service and an ideal experience are expected across all channels. When brands fail to live up to expectations, these consumers will take action and make sure their peers know about it.

While today’s younger consumers are increasingly unforgiving, it’s not because they’re “all about me.” Their economic challenges are as much a part of their everyday life as the avocado toast they have come to love — and these challenges are shaping spending habits and influencing brand interactions.

Our research revealed that 76% of younger consumers only give brands two to three chances before they stop shopping them. And once gone, they don’t typically come back. One in three younger consumers said nothing could be done when asked what a brand could do to win them back.

So how do brands build loyalty when price has the potential to outweigh quality or brand interactions? Now more than ever brands need to fully focus on the customer. That’s why it’s essential for brands to gain an intimate understanding of today’s younger consumers and the economic situations they’re facing. Brands must also show these consumers that they’re getting the basics right and addressing functional needs. With the foundation of loyalty in place, brands can concentrate on exceeding expectations and meeting needs — from both an experiential and situational perspective. By addressing the fundamentals as well as the overall experience, brands will have gone a long way in winning the hearts and wallets of today’s younger consumers.

Shannon Andrick is VP of marketing advancement at Alliance Data’s card services business, and focuses on emerging trends in the retail landscape.

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Regulatory Wrap-Up: Weekly recap of retail-related legislative/judicial developments – Aug. 6

BY CSA Staff

Wages

Arkansas – The secretary of state’s office granted a 30-day extension to petition gatherers for the $11/hr minimum wage ballot initiative. They met the threshold of valid submitted signatures in order to qualify for the extended time and must now gather and submit an additional 15,000 valid signatures in the coming weeks to qualify for the Nov. ballot.

California – The state supreme court ruled that Starbucks Corp. must pay workers for off-the-clock work at closing. At issue is a Starbucks policy that requires an employee to clock out before uploading data about employees’ hours, sales, and other information. The ruling establishes a new precedent on the issue. Also of note, the 9th Circuit Court of Appeals is reviewing the policy to determine whether it violates federal law. Employers will need to watch both cases and adjust practices accordingly.

Michigan – In a deadlocked 2-2 vote, the state board of canvassers failed to certify the proposed $12/hr minimum wage initiative for the Nov. ballot. Two members of the board cited a pending court case brought by the business community that alleges that the proposed language fails to identify and amend the proper sections of existing state wage law which is a technical violation of the initiative process. A three-judge panel will rule on that case in the coming weeks, following which the state board could revisit the issue depending on the panel’s decision.

Missouri – The secretary of state’s office approved language for the Nov. ballot that would increase the state’s minimum wage to $12/hr by 2023.

Cook County, IL – Advocates were successful in getting a minimum wage increase on the Nov. ballot as a non-binding advisory referendum question. The current countywide law calls for a $13/hr rate by 2020 with future increases tied to inflation, but 109 of 125 localities chose to opt out of the mandate last year. The question is now being put to the voters directly.

Washington D.C. – The city council scheduled a hearing for Sept. 17 to consider legislation that would overturn the voter-passed initiative which rescinded the city’s tip credit. The initiative passed in June by a 56 percent – 44 percent margin. At least half the city council has voiced opposition to the initiative, citing the potential negative impact on the restaurant industry.

Disney – In an agreement with some of the larger unions representing Disneyland Resort workers, the California theme park has agreed to raise the minimum wage for its workers to $15/hr by 2019 and to $15.45/hr by 2020.

Report – The job-review website Glassdoor released a study that found that median base pay for U.S. workers grew 1.6 percent in July compared with the same time a year earlier.

Paid Leave

U.S. Senate – Sen. Marco Rubio (R-FL) unveiled his long-awaited paid leave legislation that allows parents of newborns at least two months of paid parental leave, compensated by the early withdrawal of Social Security benefits roughly equivalent to 70% of their wages. Participants would then delay the date on which they would begin receiving retirement benefits to make up for the amount withdrawn. While receiving significant media attention, passage before Congress adjourns for the year is unlikely.

Michigan – The state board of canvassers certified the proposed paid leave ballot initiative for the Nov. ballot. The mandate would require that employers with more than 10 workers provide at least 72 hours of earned sick time per year and 40 hours for smaller employers. The state legislature could still act and prevent the initiative from appearing on the ballot.

Cook County, IL – Advocates were successful in getting paid sick leave on the Nov. ballot as a non-binding advisory referendum question. Paid leave is currently on the books countywide but 109 of the 125 localities chose to opt out of the county law last year. The question is now being put to the voters directly.

Labor Policy

NLRB – The National Labor Relations Board announced this week that it is accepting public comment on whether or not to overturn the Obama-era Purple Communications decision. That ruling determined that employees could utilize employer email systems to conduct union organizing campaigns. It found that such activities were protected under the National Labor Relations Act. The Board is also inviting comment on other employer-owned computer resources other than email, signaling that it may address the issue in a much more comprehensive fashion.

Taxes

Nebraska – The Department of Revenue notified out-of-state retailers that sell above a certain threshold into the state that they must register and begin collecting and remitting sales taxes on Jan. 1, 2019. The announcement noted the possibility of further authorizing legislation, which is unlikely to occur until the legislature convenes early next year.

Cupertino, CA – The city council pulled back from a plan to institute a per employee “head tax” through a ballot initiative in the fall. Similar to the Seattle tax that failed earlier this year, the council backed off after pressure from the local business community, including Apple, Inc., which is headquartered in the city and is the largest employer with nearly 20,000 workers.

Trade

Federal – A bipartisan group of senators introduced legislation that would give U.S. Congress and the Defense Department investigative powers under the Section 232 process. Section 232 of the Trade Expansion Act of 1962 gives the president varying levels of authority to determine if specific imports pose a threat to national security. President Trump has used this authority to impose steep tariffs on steel and aluminum imports from U.S. allies. Republicans and Democrats in Congress want to limit the President’s power as rhetoric around trade continues to escalate. The bill would likely need a veto-proof majority to become law but does not yet have that level of support.

Federal – President Trump has indicated he may raise the proposed tariffs on $200 billion of Chinese imports from 10% to 25% in a further escalation of the trade war with China. The U.S. has already imposed a 25% tariff on $34 billion in Chinese imports and China has retaliated in kind. The proposed expanded product list includes a variety of consumer products as opposed to the initial round which consisted of mostly industrial and agricultural products.

Key Takeaways

  • The introduction of the paid leave legislation by a prominent Republican leader is an important milestone in the life cycle of the issue. It is the first time that Republicans in Washington have engaged on the issue in a meaningful way. The legislation has an uphill battle, but it signals that the issue is here to stay – for Republicans at all levels of government. Until now, it has been largely viewed as a priority of the labor community and been championed by labor-friendly Democrats. No longer. It is now a bipartisan issue and as such, the business community – especially entry-level employers – will be forced into this conversation as policymakers of both parties search for solutions.
  • The Starbucks wage and hour case in California is an important one for employers to understand and monitor closely. Not only does it set a new compliance standard for all employers in California when it comes to working off-the-clock – even de minimis work – but also it opens employers up to significant litigation in the form of class action lawsuits over back pay. Employers need to follow this case and protect themselves from the potential ramifications.

Legislature Status for Week of 8/6/18

  • The United States Senate is in session this week
  • The United States House is in recess this week
  • Two state legislatures are meeting actively this week:
    • CA, MA

Podcast

Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Nation’s Restaurant News website, or by clicking here, and when you download the podcast and subscribe on iTunes here.

The Regulatory Wrap-Up is presented by Align Public Strategies. Click here to learn how Align can provide your brand with the counsel and insight you need to navigate the policy and political issues impacting retail.

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News

Kidbox launches private-label lines, and new ‘box’

BY Deena M. Amato-McCoy

A children’s clothing-in-box company is launching new apparel options — just in time for back-to-school season.

Kidbox is introducing three private-label lines to complement the more than 130 premier brand partners it already features in its merchandise portfolio. The lines, Miki B., Kid’s Club and Baby Basics, feature gender neutral items, and fit into Kidbox’s four style options, city cool, sporty athletic, modern casual, and classic preppy.

“Kidbox has the unique ability to design according to kids’ own style preferences, as opposed to most brands that design to showcase style and color trends,” said company CEO Miki Berardelli. “By tapping into kids through our Kids board of directors, engaging with our customers, and knowing their shopping habits, we have a deep understanding of how kids want to express themselves when it comes to what they wear.”

Separately, the apparel company is also launching a uniform box that features apparel from uniform and schoolwear manufacturer French Toast. Available in sizes 5-14 for girls and 5-16 for boys, each box contains between seven and eight items that cost less than $10 each. The box costs $68.

For every Uniform Box kept, Kidbox will donate a new uniform to a child in need through its partnership with Delivering Good.

Kidbox is only one company competing in the growing children’s clothing subscription segment. Other companies that have found a way to differentiate themselves in the increasingly crowded category include BabyGap, Old Navy, Target and StitchFix, among others.

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