Gen Y spending drops as financial crisis leads to back-to-basics approach

Generation Y has dumped wild partying, internet chatrooms and excessive spending in favour of the simple pleasures of spending quality time with friends, famers’ markets and sewing classes, according to new research from independent youth and lifestyle-focussed marketing agency Lifelounge Group.

The group’s Urban Market Report reveals that total Gen Y spending across key lifestyle areas including music, entertainment, travel, fashion and sport fell from $47.5 billion to $42.4 billion in 2008-09.

The biggest fall was in entertainment spending, down $7.3 billion to $19.4 billion, while travel spend increased $4.4 billion to $9.3 billion.

Lifeloung chief executive Dion Appel says there has been a clear shift back-to-basics amongst Gen Y, who are seeking “nostalgic” experiences after being badly shaken by the global financial crisis, which has hit their peers and their main source of funding – their parents.

“It definitely is about a return to basics and about them being able to have a real influence on the style they are adopting,” says Appel.

Of course, the idea of “nostalgia” means different things to different young adults. While for some it might just mean fondly remembering attending a musical festival last summer, Appel says there is a strong trend of young adults trawling through their parent’s music collection and embracing styles such as 1960s psychedelic rock and even swing and old jazz.

“It’s a sense of stability, security and happiness,” Appel says.

Part of this back-to-basic trend is a shift away from social networking. While the popularity of social networking website Facebook surged during the year (43.8% of respondents listed it as their favourite website, up from 21.3%), Appel is seeing young people place more value on meaningful face-to-face relationships.

While social networking’s popularity is unlikely to plunge, Appel sees smaller, more personal networks becoming prevalent.

“You are not going to gain status by having more friends online than you have relationships in real life.”

The shift in Gen Y tastes should force some changes from marketers. Just looking cool isn’t going to be enough – Gen Y wants real connection.

“A simpler approach to marketing is what is going to get the cut through,” Appel says, pointing at brands such as Converse which has a classic, contemporary feel to its marketing by emphasising the heritage of its brand.

He also says brands should be looking at experience-based marketing opportunities, such as sponsoring sports and other events that Gen Y enjoy.

“Spending on sponsorship usually falls in tough times, but I would actually flip that model on its head and see how you can make sponsorship work harder for you.”

“What Gen Y are looking for is brands to create conversations with us and understand what they need and who they are in the real world.”

Brands expected to do well in 2009-10:

• Converse
• American Apparel
• Vans
• Lee
• APC
• iPhone
• Vodka Cruiser
• Asahi
• Little Creatures
• Coopers
• Pure Blonde
• Nintendo Wii

Source: Lifelounge