Sunday, February 14, 2016

Who Are These People and How Will They Get Their Stuff?

“Our generation doesn’t knock on doors. We will call or text to let you know we’re outside” -unknown

About this time last year Goldman Sachs published a report on how Milleniels are likely to change the economy ( If you have not read this “info-graphic”, I strongly suggest that you take a few minutes and do so. It’s well-done and to the point. And there are significant implications for transportation and logistics service providers. Milleniels are consuming differently and that means the supply chain will look different. For decades most of our thinking about the supply chain revolved around how to get materials and supplies into production and then how to get the finished product to the point of purchase which was for most part at the seller’s store. Now that purchasing event has moved. Increasingly, the point of purchase has nothing to do with the seller’s store. It’s all about the product and the purchaser. What is purchased, when it’s purchased, how it’s purchased and finally how much is purchased…these will determine how it’s delivered. And while purchasing habits are changing across all demographics, those of the Milleniels are likely to have the most impact.

So what are they buying? The bigger question may be what are they not buying? They are not “buying” into marriage, starting a family, driving around in a big SUV or owning a house. Those are big “nots” which have big impacts on “freight markets”. Think of all the shipments that are generated by household formation. Now we have the largest generation in the history of this country saying…Nah…not sure we want all of that; and very sure we don’t want it right now. Certainly they will spend their money on certain products as noted in the Goldman Sachs report. But when you consider what they are buying, it doesn’t move the needle much in terms of freight volumes.

When are they buying? Certainly not in the seasonal patterns we’ve grown accustomed to seeing. I think the marketplace is still trying to figure this out. But, it’s fair to say that they are buying less often and in ways that are unpredictable. And when they do buy, they want it now and with minimal hassle. Again, behaviors and expectations which significantly impact the supply chain.

How are they buying? Like many of us, only more so…they are buying on-line. The point of purchase is now an iPhone. It’s where research, shopping and purchasing takes place. This means that brick and mortar stores which traditionally served as supply points where products could be viewed, touched, tried-on and purchased are of less importance. While the stores are not going away entirely, they are likely to get smaller and carry a lot less inventory. The freight business that moves product in volume from distribution centers or manufacturing facilities to retail stores is going to get a lot smaller. The freight business that moves individual orders from large inventory locations to the final buyer is going to get a lot bigger. Amazon isn’t going to take over the world, but “Amazon-like” models will become the primary way many products are delivered to buyers in the future. And it’s a model that requires scale, so there aren’t likely to be very many of them around. It is a model that was bound to come as technology enables us to see, know and buy more stuff, more efficiently.

And lastly, how much are Milleniels buying? Less. Less seems to be more for this generation. It may well change over time, but at this point we have a generation of young people who came of age in the time of 9/11, the War in Iraq, Katrina and the Great Recession. Many of them have massive student loan debt and uncertain job prospects. The world is a scary place. So they go back home to live with their parents. Or they share an apartment with friends and/or lovers. They worry about global warming and what the world will look like for their children if they ever get around to having any. Taking on a big mortgage to live in a big house doesn’t make much sense to them. It’s a major shift in attitude from those who grew up in the 80’s and 90’s. What happens before your 10th birthday has a lot to do with how you look at yourself. But what happens between the ages of 10 and 20 has a lot to do with how you look at the world. And those kids who were 10 years old in 2000 see the world much differently than those who were 10 years old in 1984.

No comments: