Generation Y is “choosing life” a whole lot differently than generations before them, we know that by now. They are the smartphone generation, they are entrepreneurial, they are happy, they don’t believe in God that much, they want brands to be true and transparent. And: they tend to suffer from commitment phobia, thus forcing companies to re-evaluate their strategies. Industries that traditionally require long-term contracts or some kind of a commitment will need to adapt their business models in order to retain their Gen Y customer base, which consists of more than 65 million Americans. The industries that will most likely be affected by this trend are, according to IBISWorld: the Gym, Health and Fitness Clubs; Cable Providers; New Car Dealers; Wireless Telecommunication Carriers; Furniture Stores; and Wedding Services. All of these industries earn about one-fourth or more of their revenue from the Gen Y group in the US and their goods and services involve some kind of commitment. Check out more details on the industries and how they are adapting to Generation Y below:
1. The Gyms, Health and Fitness Clubs industry
Many fitness clubs realize the importance of catering the Generation Y age group, considering its members generate an estimated 24.0 percent of the industry’s $25.3 billion,according to IbisWorld.
As a result, they analyze, fitness clubs are increasingly allowing customers to pay on a monthly basis without making a yearlong commitment. Some gyms will even prorate a member’s monthly payment if the customer is going to be out of town for an extended amount of time. As gyms and fitness clubs move toward monthly contracts, IBISWorld expects more Gen Yers to join gyms.
2. Cable providers
This industry is a good example of an industry that demands a commitment from its customers. Gen Y generates about 16.2 percent of the industry’s $63.5 billion, according to IbisWorld. Cable providers generally require a yearlong contract, which makes many commitment phobes hesitant to purchase such services.
Cable providers have been offering discounts on yearlong contracts at certain times of the year. This tactic has been enticing to Gen Yers, many of which remain price-conscious after being heavily affected by the recession. In the coming five years, IBISWorld expects cable providers to continue reevaluating their contract terms. With the increase in online streaming of TV shows and movies to computers and WiFi-enabled TVs, many consumers will rethink their cable contracts.
3. Wireless Telecommunications Carriers
Similar to cable providers, operators in the Wireless Telecommunications Carriers industry require customers to sign a long-term contract. Although many Gen Yers commit to these contracts, they cringe at the idea of not being able to change providers quickly and without expensive fees.
New firms with more flexible terms have entered the industry. These companies do not require long-term contracts but still provide 3G and 4G networks and plans with unlimited talk and data. Also, major companies like AT&T and Verizon in the US offer pay-as-you-go phones for people who may want to be on larger networks but not be tied to a contract. While the $20.1-billion Wireless Telecommunications Carriers industry is affected by Gen Y’s commitment phobia, it manages to get by relatively unscathed. This is due in part to the fact that smartphones are extremely important to this generation since it values being constantly connected to social circles and breaking news.
4. Furniture stores
The commitment phobia of Generation Y does not stop at memberships and contracts alone, according to IbisWorld. Companies that sell expensive products with long lifespans are also affected. An example is the furniture stores industry. “Quality furniture is generally expensive and most consumers purchase it with the intention of keeping it for many years. Inhibited by the fear of committing to a style that could quickly become outdated, a residency that could quickly change, or the inability to shift one’s decorating design without a large amount of money, the Gen Y group often opts to purchase inexpensive furniture.”
That’s why IKEA is doing such a great job among Y’ers, and Target and WallMart in the US are retailing more and more furniture to cater to this trend. ” With Gen Y accounting for 14.0 percent of industry revenue currently, furniture stores will have to change their product lines and strategies if they wish to attract more of this generation in the coming years.”
5. New Car Dealers
Similar to furniture stores, the New Car Dealers industry is negatively affected by commitment phobes because its products require a financial commitment (sometimes a long-term one). Gen Y’ers are hesitant to take the plunge of purchasing a new car, hurting the $510-billion industry. Further pressuring the industry is the move toward renting cars for short periods of time. The expansion of car sharing companies like ZipCar is helping consumers get by without owning a car.
To attract more Gen Y drivers, new car dealers will need to prove why buying a car is more beneficial than public transportation or car sharing. Dealers might be able to pull customers back by increasing their leasing abilities, enabling drivers to lease cars for shorter amounts of time or selling cars at heavy discounts.
6. Wedding Services Industry
Gen Y generates about 58.2 percent of the wedding industry’s $49.4 billion in revenue, according to IbisWorld. But, over the past 40 years, the marriage rate has been declining and at an accelerated rate since the start of the recession in 2008. With an increasing social acceptance of cohabitation, Gen Y will continue to put off marriage.
IBISWorld expects many Gen Yers to get married in their early and mid-30s. When they do get married, they are likely to spend a significant amount of money. In 2010, for instance, the average wedding cost more than $20,000. Although Gen Y’s commitment phobia will hamper the Wedding Services industry in the near term, growth may pick up as the group approaches its 30s and finally decides to settle down.
Reports to all industries covered in this article can be purchased via IBISWorld, if you like. To download full research reports for the industries discussed in this article, click on the report titles: Gym, Health & Fitness Clubs, Cable Providers, New Car Dealers, Wireless Telecommunication Carriers, Furniture Stores, Wedding Services.