Soaring property values, increased urban dwelling, housing shortages and stagnating salaries are just some of the factors that are keeping younger generations out of the housing market. Many millennials now say they do not think they’ll ever be able to afford a home, and things are even bleaker for Generations Z and Alpha. And for those who are eventually able to buy a home, chances are higher that they will buy a smaller home – a condo or townhouse – rather than a single-family home with a yard and garage.
How will this shift towards renting and smaller homes affect retailers?
A trend away from home ownership and ownership more broadly is already infiltrating the retail sector, as seen with the cropping up of rental and subscription models in categories ranging from apparel to tools. But look a little deeper and there may be hidden opportunities for retailers who can think expansively about what a society living in smaller, rented homes might mean on a broad scale.
1. It’s not just about the money
Even millennials who are in a position to buy a home may not choose to invest in property. Why not? Delaying marriage and parenthood, less maintenance, not wanting to commute (or own a car) and preferring a downtown lifestyle are all factors that are keeping younger people out of the housing market. Flexibility and accessibility are values brands should think about when considering their retail footprint. Meeting people close to where they live is more important than ever. The popularity of home delivery should indicate to brands that they need to figure out how to get closer to the customer – mobile concepts like the Penguin Book Truck and Truck Trainers are taking the pop-up to the next level by adding wheels.
Key question to consider: How can you shift your retail footprint to get your products physically closer to your customers in urban spaces?
2. Rental models
According to this infographic from Adweek, consumers are renting everything from power tools to the kitchen sink. Temporary housing and temporary solution were among the top reasons consumers chose a subscription or rental model, but other reasons included try-before-you-buy and expensive up-front costs. What’s really interesting is that only 6 percent of respondents indicated they preferred to rent rather than own.
Key questions to consider: What barriers are getting in the way of allowing customers to purchase your products? How can you offer creative solutions to these barriers? If you are offering a rental model, how can you make it as desirable as owning?
3. No more storage
Condos and other small urban homes do not come with double garages, basements and garden sheds. Storage space is at a premium for renters and condo dwellers – smaller homes were not built to store large quantities of anything and many storage solutions will mean products are openly visible. CPG brands need to think about smaller, more beautifully designed packaging that can be proudly displayed. Retail brands that can offer storage as part of their model may find this becomes a game changer in urban markets.
Key questions to consider: Where will this product live in the customers home and is your package design/product optimized for the location? Can you make it more compact? Can you remove storage as an obstacle?
4. Living space
In Europe and North America, we are accustomed to having personal space. As square footage in the home diminishes, retail brands have an opportunity to fill a need: living space. The co-working space has already become ubiquitous – but there are other ways retailers could accommodate needs that have traditionally been met in the home. Sonos created tiny little homes to listen and relax in, while Casper invites customers to come in – and nap. Maker spaces with woodshops, sewing machines, robotics labs and more have become popular in cities where a garage is a luxury. Indie video gaming clubs look a lot like a suburban teen’s dream basement, while boardgame cafes recreate the living room. As smaller homes become more common, we will look for other places where we can feel that same sense of belonging.
Key questions to consider: Is there a natural way in which your brand could utilize its retail footprint to fill a customer need for living space?
5. Little luxuries
Although it’s not just about the money, the financial reality is that younger generations have less disposable income than their parents. On the other hand, they’re willing to pay more for something if the brand aligns to their values, the product is of high quality and the experience delivers value in its own right. If home ownership is no longer a given, the items a consumer considers to make a home their own become more important than the space itself.
Key questions to consider: Does your brand truly live up to its values, not only in messaging, but through the entire customer journey? Has your brand earned a treasured spot in consumers’ smaller homes?
The evolution of “home” is one that is changing the way people eat, sleep, work and play. Cul-de-sac living isn’t dead, but its reign as the status quo is over. When retail brands consider the changing relationship between their customers and living space, asking these five sets of questions can act as a starting point for creating new models and strategies to evolve and utilize their retail footprint to fill new consumer needs.