Millennials Have Forced Traditional Industries to Innovate
Countless cars fill the once busy street in front of city hall in Philadelphia, Pennsylvania. At a standstill, the designated taxis honk their horns in protest of the ride sharing companies Uber and Lyft.
The on-demand ride sharing apps have been disrupting the reign of the traditional taxicab. In cities like San Francisco, taxi rides have declined as much as 65%, most of which is attributed to these ride hailing services.
Millennials have been the champions of this change. Across the US, 18 to 29 year-olds are the most likely to use the services with 28% having used one of the services before. Roughly 25% of those millennials who have used Uber or Lyft once before, do so on a daily or weekly basis.
Taxis, while one of the most publicized, are far from the only business to be outdone by new technological innovations aimed at and shaped by young adults. Traditional industries like television, newspapers, movies, mattresses, and even gyms are being swept aside by the shifting preferences of millennials—the largest generation to ever have purchasing power.
The first generation to grow up as digital natives with computers in their homes and modern technology in their hands, mobile and web access has played a critical role in determining which services have been able to survive the transition.
A recent study found that 47% of millennials access a business via mobile at least once a day, furthermore finding that 36% made a decision about where to spend their money or even switched companies based on what they were able to accomplish on mobile. These statistics and more are what is fueling the success of companies like Uber, Lyft, Luxe, Audible, and many more.
Granted, startups are not the only ones benefitting from these changing priorities. Large companies are tasking their labs and innovation units with creating mobile applications tailored for this growing new market. A surge in the mobile banking industry is replacing the previous need for in-person branch visits to deposit checks or assess the balance of one’s accounts.
Capital One Labs, the Visa Innovation Center, and Mastercard Labs have all released multiple mobile banking and payment applications in the past few years. Visa announced to its investors in July of 2014 that it was opening a new innovation center in San Francisco in order to “explore new products and technologies that advance the payment experience in areas such as mobile...”.
The push for mobile stems from an even stronger desire for self-sufficiency. Raised in the worst financial crisis of recent history, millennials work longer hours than their previous generations and 26% are working two or more jobs.
Data like this means that young adults today have less time to engage in activities such as going to a bank, seeing a tax accountant, or working with a travel agency in person. They would instead prefer to cash checks instantly on their phones, file taxes online, and book flights themselves when they can find the time rather than meeting during already saturated business hours.
Perhaps most unique to this generation is their aversion to commitment; according to Goldman Sachs only 15% consider owning a car important, 60% rent their homes, and the median age for marriage is 30 years old (up from 23 in 1970s).
“It’s a highly motivated, ambitious generation,” says Helen Fisher, a biological anthropologist at Rutgers University. “A lot of them are afraid that they’ll get into something they can’t get out of.”
This fear of commitment has created an opening for new business models and companies. SaaS, or software-as-a-service, was born out of the desire for less loyalty to a product. By using a monthly subscription-based model, companies can attract a larger number of millennials who otherwise may not be willing to commit to a long-term engagement while simultaneously creating a recurring revenue model and higher customer lifetime value.
WeWork, a company with a $10B valuation, has used this to its advantage by disrupting one of the most conventional business models: office rentals. Instead of the traditional lease agreement of a year or more, WeWork offers private offices and hot desks in a coworking environment on a monthly basis, with no long-term leases or commitments past 30 days. WeWork has since become the largest lease holder in Manhattan, and has attracted the partnership of traditional property managers such as Boston Properties who see the opportunity to attract a new generation of tenants.
Similarly, ClassPass has transcended regular gym memberships. Rather than offering access and commitment to a single gym, ClassPass users are able to reserve classes on their mobile phone at gyms all around their city. Gone are the days of long-term contracts, expensive gym memberships, and showing up twenty-five minutes early in hopes of reserving a spot in your gym’s group class.
While it is apparent that the priorities of millennials have shifted from previous generations, what is yet to be seen is how many enterprises and industries will have the agility to innovate quickly enough to save themselves from going the same way as taxicabs.