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Retailers: Stop blaming millennials for weak sales

From cold and wet weather to a strong dollar, retailers' laundry list of excuses for soft sales performance is ever growing. Now they can add another one to their lineup: Millennials.

A new report by Forrester Research argues that conclusions about shoppers born between 1980 and 2004 "often provide convenient excuses" for retailers hoping to explain away their shrinking market share. (Tweet This)

In reality, the report said, millennials are hardly the only generation to grow up alongside a major technological disruption—just think of the introduction of cellphones or the popularization of PCs and laptops.

A shopper browses at an Old Navy store in San Francisco.
David Paul Morris | Bloomberg | Getty Images
A shopper browses at an Old Navy store in San Francisco.

What's more, millennials aren't the only group to adopt digital and mobile technologies, including 34 percent of online shoppers who are older than 65 and own a smartphone.

"Misleading media and hype lead [online business] executives to believe that these changes are somehow different from anything that's happened before, and that they must address these generational variances immediately or perish," Forrester analyst Sucharita Mulpuru said. "That perception is misguided at best, false at worst."

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Retailers from Whole Foods to Macy's have been tweaking their business strategies to attract a younger shopper. Whole Foods said last month that it will launch a new, low-cost grocery format that caters to millennials; Macy's is testing an off-price concept and beefing up its millennial-facing wedding category.

But transforming a company's business plan to reach this group may not be worth it, Mulpuru said. For one, millennials are financially strapped. Households under the age of 25 shelled out 7 percent of their total spending on education in 2013, up from 1 percent in 1973.

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They've also experienced more decline in real income than any other age group over that time frame. Compare that to the purchasing power of people ages 55 and older who, according to a recent report by FBIC, control more than three-fourths of the country's household net wealth.

For another, attracting consumers at a young age no longer has the long-term benefits of creating a "customer for life"—something Mulpuru said doesn't exist in today's hypercompetitive retail landscape. According to Forrester, there were nearly twice as many bricks-and-mortar stores in 2014 as there were in 2002.

Deloitte's Kasey Lobaugh noted last month that thanks to lower barriers to entry in retail, the top 25 retailers by revenue lost 2 percent of their market share from 2009 to 2014.

He agreed that millennials are not that different than previous generations—they simply have more choices. Therefore, it makes sense that they would be less loyal to one particular retailer, when they can often get a better deal or more attractive product from another brand.

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"At the end of the day, people are rational," he said.

Despite these challenges, both Lobaugh and Mulpuru agreed retailers can't ignore millennials, particularly if their product is an item a 20-something would want. In addition to weddings, these categories include baby products and automobiles, as the group starts to enter adulthood.

Mulpuru added that it's also critical to identify affluent, high-spending millennials, who can give retailers a disproportionate boost to their top lines.