The Effect Of Millennial Migration On Retail In The US

Aerial view of residential houses in America.

From 2020 to 2021, 85% of homebuyers aged 31 to 40 bought either in a suburb or a small town. Across the US, millennials are moving from major cities to the suburbs en masse. Why? They’re getting priced out. According to Business Insider, “Many millennials hoping to buy a home and have kids are being priced out of the urban neighborhoods they've built their lives in and that were reshaped to fit their lives.” But what effect does this migration have on brick-and-mortar retail? One thing is certain: accurate data lies at the heart of it all.

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Why Millennials Are Moving Out Of Cities

Due to increasing housing costs in cities, millennials have been moving out of urban areas for years. When the COVID-19 pandemic hit, millions of people found themselves confined in small apartments. As a result, demand for larger homes skyrocketed. However, there is a shortage of family-sized apartments in cities, as developers find building studios and one-bedroom apartments more profitable. This has led to increased demand for larger homes in the suburbs. Suburbs offer more space at a lower price point, enticing millennials to compromise on the trendy cities they helped rejuvenate. 

According to the latest Census data, adults aged between 20 and 29 were more inclined to move due to housing-related reasons rather than family or employment-related ones in the year 2022. Research conducted by Harvard's Joint Center for Housing Studies has revealed that cities with the highest rents and the least availability of apartments with three or more bedrooms have witnessed a major shift of their millennial population to the suburbs in recent years.

Living in walkable communities with plenty of amenities such as shops, restaurants, and public spaces is a popular choice among millennials. However, such areas tend to be more expensive. According to a 2023 analysis of walkable urbanism, homebuyers in the 35 largest American metropolitan areas paid 34% more to live in walkable neighborhoods, while renters paid 41% more. Enter the Goldilocks principle of millennial real estate: millennials want to move out of cities because of exorbitant rents and interest rates and find comparably walkable neighborhoods in areas that are becoming increasingly pricey. 

All this talk of budget and the cost of living brings us to our central question. Namely, what does this mean for brick-and-mortar retail? How can retailers adapt to these evolving demographics?

Millennial Sprawl’s Effect On Retail

Millennials' migration patterns can have significant implications for the retail sector, influencing consumer behavior, market demand, and the geographical distribution of retail establishments. Here's a look at how these migration trends can impact retail.

Shift In Retail Demand 

As millennials move out of cities and settle in suburban or rural areas, retail demand in these locations may increase. Retailers may need to adjust their market strategies and product offerings to cater to the preferences and needs of suburban and rural consumers, potentially leading to the expansion or establishment of new retail outlets in these areas.

Format And Assortment Changes

Retailers may need to adapt their store formats and product assortments to align with the preferences of consumers in suburban and rural communities. This could include offering larger stores with a broader selection of products, including home goods, outdoor equipment, and family-oriented merchandise catering to the needs of millennial families. Moreover, their home delivery strategies may also need to be fleshed out as hundreds of thousands of shoppers head outward from central hubs.

Omnichannel Integration 

Retailers must integrate their online and offline channels effectively to reach and serve millennials, regardless of their location. This may involve enhancing e-commerce capabilities, offering click-and-collect options, and leveraging data analytics to personalize the shopping experience for both urban and suburban/rural consumers.

Community Engagement

Retailers who expand into suburban and rural areas can benefit greatly from actively engaging with their local communities and using grassroots marketing initiatives to build brand loyalty and foster connections with their customers. By participating in community events, sponsoring local organizations, and forming partnerships with them, retailers can establish a strong presence and deepen their ties with their consumers.

Logistics and Distribution

Changes in population distribution may necessitate adjustments to retailers' logistics and distribution networks to ensure efficient supply chain operations and timely delivery of products to outlying areas. This may involve optimizing transportation routes, establishing regional distribution centers, and investing in last-mile delivery solutions to meet the evolving needs of consumers across different locations.

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How Data Powers Agility

Store and shopper data play a crucial role in helping retailers remain agile and adapt to changing consumer behaviors and market dynamics. There are several ways in which retailers can leverage data to enhance agility…

  • Customer Segmentation: Retailers can use store and shopper data to segment their customer base and gain insights into their preferences, purchase behavior, and demographics. By understanding different customer segments, retailers can tailor their marketing strategies, product assortments, and promotions to better meet the needs and preferences of specific groups, including upwardly mobile suburban and rural consumers.

  • Demand Forecasting: Analyzing historical sales and traffic data can help in forecasting demand more accurately. This enables retailers to optimize inventory levels, minimize stockouts, and reduce excess inventory. By leveraging advanced analytics and predictive modeling techniques, retailers can anticipate shifts in consumer demand and adjust their merchandising and stocking strategies accordingly.

  • Personalization: Retailers can create a personalized shopping experience for their customers by analyzing their purchase histories and shopping data. This can include targeted recommendations, promotions, and offers based on the customer's preferences and past interactions. By using personalization, retailers can improve customer engagement, increase conversion rates, and foster loyalty, which ultimately leads to revenue growth and increased sales.

  • Supply Chain Optimization: Store and shopper data can be integrated with supply chain data to optimize inventory management, procurement, and logistics operations. By tracking sales trends, stock levels, and supplier performance in real time, retailers can streamline the supply chain, identify potential bottlenecks or disruptions, and make data-driven decisions to ensure the efficient flow of goods from suppliers to stores.

Retailers can improve their agility, responsiveness, and competitiveness in today's challenging retail and real estate environments by using store and shopper data. By analyzing data to inform decision-making across all aspects of their operations, retailers can quickly adapt to changing market conditions, capitalize on emerging opportunities, and provide exceptional experiences that meet the needs of today's diverse and demanding consumers – no matter where they relocate.

Although millennials moving out of cities may pose some initial difficulties for retailers, it also creates chances for growth and expansion into untapped markets. Retailers who understand and react to changing demographic patterns can position themselves to take advantage of upcoming opportunities and stay relevant intergenerationally.

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About the author:

Headshot: Ashton Kirsten

Ashton Kirsten, Marketing Communications Coordinator, RetailNext

Ashton holds a Master's Degree in English and is passionate about starting conversations through impactful content and executing data-driven creative strategies. She is based in Johannesburg, South Africa, where she can be found reading, writing and researching.

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