5 Factors influencing Millennial Decision-Making in the Circular Economy

Environmentally conscious and Internet-savvy, millennials possess unique consumption trends that can reshape climate impact.[1] As their age and income grow, what will their role be in the circular economy?

Dubbed the “Green Generation,” millennials will make up 75 percent of the global workforce by 2025.[2] With a combined spending power of 1 trillion USD, this generation favors purpose over profit.[3] Born into an era of climate change and environmental awareness, millennials seek transparent and responsible business practices, saying they are willing to pay a premium for greener products and services to save the planet.[4]

Yet, millennials fail to walk the talk when it comes to sustainable shopping. The State of Fashion reported that although 66 percent of millennials are eager to buy from eco-conscious and ethical brands, only 26 percent actually do. This “green gap” occurs when buyers claim positive attitudes towards planet-friendly alternatives, but other factors intercept the purchasing decision.[5] Here we unfold five considerations that influence millennial decision-making and how brands can fine-tune their strategies to change that.

It’s all in the label

While millennials believe that brands have the power to change the polluting practices of the garment industry, most are skeptical of their sustainability claims. The conscious consumer market stands at a whopping 150 billion USD, yet few shoppers go online and read about a brand’s corporate values and ethical practices. The pervasiveness of green- and blue-washing further dishearten even the fiercest supporter of responsible consumption. A recent survey shows that eight out of ten consumers do not trust sustainability claims made by fashion brands today.[6]

To gain buyer trust, brands need labels with clear, visible, and easily accessible messaging.[7] Companies can nudge consumers towards better purchasing habits by aligning their business models with trustworthy and universally recognized labels.[8] Certifications such as the Global Organic Textile Standard (GOTS) and the Leather Working Group (LWG) fact-check responsible practices from harvest to production. Other labels such as the Carbon Footprint of Products (CFP) and the Carbon Care Certification detail a product’s ecological impact — helping skeptical consumers make informed decisions. On average, one-third of Europeans take ecolabels into account, with even higher figures in Sweden (70 percent) and Denmark (57 percent).

The power of the variety pack

Product availability is a significant driver in attracting and retaining customers. In fashion, sustainable apparel remains a niche market, with most brands offering only a subset of items committed to responsible wear. The lack of diversity and choice fails to meet millennial tastes and expectations, adversely influencing purchases.[9] In 2020, the value of the ethical fashion market was just one-quarter of the fast fashion sector — a slice too thin.[10],[11]

The good news is that consumers’ desire for long-lasting apparel is on the rise. According to NYU Stern Center’s research, demand for green products grew 5.6 times faster than non-eco products between 2013 and 2018.[12] This market potential means an opportunity for brands to expand their sustainable offerings beyond just a handful of collections — providing more options to win over lukewarm millennials. Companies within and outside the fashion industry that have recognized and capitalized on this growing demand have reaped rewarding results. In 2019, Hewlett Packard’s switch to sustainability activities helped boost the company’s sales by over 1.6 billion USD.[13]

The pricing conundrum

Price is relevant for all consumers, but even more for millennials — a generation that has endured two economic recessions and a global pandemic early in their careers. Price sensitivity could also be bred out of need. Millennials have an average debt of 42,000 USD per person and an increase of 300 percent in student loans compared to the previous generation.[14] The rise of digital also provides unlimited options on price comparisons at their fingertips. Six out of 10 millennials turn to brands that offer maximum convenience at the lowest cost.[15]

Higher price tags arise from costly expenditures and low demand. Fashion brands that strive for sustainable apparel face exorbitant fiscal challenges to source from sustainable supply chains, adapt to greener production processes, and meet reputable third-party certifications. On the other hand, low demand hinders economies of scale, which brings down unit price costs with production growth.[16] As more than half of millennials plan to keep buying low-cost fast-fashion clothing over pricier, sustainable apparel, a shift from both consumers and manufacturers is required to lower the price of high quality, long-lasting items.[17]

Digital’s green sweet-spot

Convenience is the new gold standard for online purchasing and represents a key determinant in the millennial decision tree. Fast fashion dominates this space by focusing on trends and accessibility. Advanced technology enables users to sync with the latest styles, while retailers reproduce designs from fashion shows to store shelves in record time. Adding marketing signage and displays, fast fashion brands also invent a sense of urgency, immediacy and exclusivity.[18] Up to 36 percent of millennials claim that fast fashion’s convenience and discoverability represent barriers to investing in responsible alternatives — widening the green gap.

To hit that convenience sweet spot, climate-conscious brands must understand a buyer’s cognitive flexibility — the ability to adapt their behavior and thinking in response to the environment — to drive consumer decisions. Research from the University of Gothenburg shows that people tend to overestimate their environmental involvement compared to the average person.[19] This eco-driven over-optimism — found across generations, but particularly amongst millennials — can reduce their motivation to act with the planet in mind.

Cognizant of this, fashion brands can shape engaging online experiences and seamless product discovery while targeting shoppers with exceptionally high levels of cognitive flexibility. This can encourage better purchasing habits, driving conversion rates and sales. Leveraging this consumer segment, which also has an annual income of 37 percent higher than the average millennial, brands can build product hype and exclusivity, using social proof to fan the demand flame.[20] “The sustainably-minded consumer prides themselves on purchasing purely slow fashion products,” says a 2022 Heuritech fashion survey. “This ‘less is more’ mindset shows a focus on fighting against overconsumption and the habits of other consumer groups by actively avoiding fast-fashion brands and wasteful treatment of their clothing,” the report adds.

Craft a compelling narrative

Proximity is a strong motivator behind millennial spending decisions. Buyers often feel a disconnect between the items they purchase and the impact on the environment.[21] A recent survey by YouGov hypothesized that if 62 percent of American citizens believe that humans are not the leading cause of climate change, they will pass the buck to others and refuse to buy green products.

Clear and purpose-driven communication educates consumers on why their purchasing decisions matter. Businesses that sell circular economy-type goods can deploy proven storytelling techniques to convey brand values and product quality through compelling facts and figures and emotional engagement.[22] If consumers realize that their shopping patterns account for 70 percent of all direct and indirect emissions, demand for green products could potentially grow.[23]

For example, apparel brand Reformation increased customers’ sustainability awareness through RefScale — a tool used to track the carbon footprint of each item. The data is shared on every product page, alongside a direct comparison of the environmental impact of fast-fashion apparel. This approach gives shoppers a tangible picture of their purchase, linking small actions with global environmental change.

Millennials believe in sustainable living — they simply need to be nudged in the right direction. Eco-brands can do more to influence better buying decisions by connecting the dots between climate impact and planet-friendly purchases.[24] As the green gap narrows, this generation will lead the much-needed change towards a more hopeful, sustainable future for all.

References

[1] “8 Characteristics of Millennials That Support Sustainable Development Goals (SDGs)” | Forbes. Available at: https://www.forbes.com/sites/margueritacheng/2019/06/19/8-characteristics-of-millennials-that-support-sustainable-development-goals-sdgs/?sh=1754e02329b7

[2] “The (Millennial) Workplace of the Future Is Almost Here — These 3 Things Are About to Change Big Time” | Inc. Available at: https://www.inc.com/peter-economy/the-millennial-workplace-of-future-is-almost-here-these-3-things-are-about-to-change-big-time.html

[3] “Defining generations: Where Millennials end and Generation Z begins” | Pew Research Center. Available at: https://www.pewresearch.org/fact-tank/2019/01/17/where-millennials-end-and-generation-z-begins/

[4] “73 Percent of Millennials Are Willing to Spend More Money on This 1 Type of Product” | Inc. Available at: https://www.inc.com/melanie-curtin/73-percent-of-millennials-are-willing-to-spend-more-money-on-this-1-type-of-product.html

[5] “The great Millennials’ trouble: leading or confused green generation? An Italian insight” | Italian Journal of Marketing. Available at: https://link.springer.com/article/10.1007/s43039-020-00015-4

[6] “Consumer fashion shopping trends” | WOVN. Available at: http://www.report.wovn.co/WovnConsumerShoppingHabits2022.pdf

[7] “Millennials Say They Care About Sustainability. So, Why Don’t They Shop This Way?” | Business of Fashion. Available at: https://www.businessoffashion.com/opinions/sustainability/op-ed-millennials-say-they-care-about-sustainability-so-why-dont-they-dont-shop-this-way/

[8] “Climate explained: are consumers willing to pay more for climate-friendly products?” | The Conversation. Available at: https://theconversation.com/climate-explained-are-consumers-willing-to-pay-more-for-climate-friendly-products-146757

[9] “Millennials Say They Care About Sustainability. So, Why Don’t They Shop This Way?” | Business of Fashion. Available at: https://www.businessoffashion.com/opinions/sustainability/op-ed-millennials-say-they-care-about-sustainability-so-why-dont-they-dont-shop-this-way/

[10] “Ethical Fashion Market 2022 — By Product, By Type, By End-User, And By Region, Opportunities And Strategies — Global Forecast To 2030” | The Business Research Company. Available at: https://www.thebusinessresearchcompany.com/report/ethical-fashion-market

[11] “Sustainable Fashion Wants Brands to Redefine Business Growth” | Forbes. Available at: https://www.forbes.com/sites/oliviapinnock/2021/09/24/degrowth-is-trending-in-sustainable-fashion-what-does-that-mean-for-brands/?sh=7632ea444a6f

[12] “The Rise in Demand for Sustainable Goods” | Marsh McLennan. Available at: https://www.brinknews.com/the-rise-of-demand-for-sustainable-goods/

[13] HP Sustainable Impact Report, 2019. Available at: https://www8.hp.com/h20195/v2/GetPDF.aspx/c06601778.pdf

[14] “How Businesses Are Reaching Price-Sensitive Millennials” | Total Retail. Available at : https://www.mytotalretail.com/article/how-businesses-are-reaching-price-sensitive-millennials/

[15] “Millennials Coming of Age” | Goldman Sachs. Available at: https://www.goldmansachs.com/insights/archive/millennials/

[16] “Climate explained: are consumers willing to pay more for climate-friendly products?” | The Conversation. Available at: https://theconversation.com/climate-explained-are-consumers-willing-to-pay-more-for-climate-friendly-products-146757

[17] “2021 Resale Report” | ThredUP. Available at: https://www.thredup.com/resale/#resale-industry

[18] “Evaluating fast fashion: Fast Fashion and Consumer Behaviour” | ResearchGate. Available at: https://www.researchgate.net/publication/330769666_Evaluating_fast_fashion_Fast_Fashion_and_Consumer_Behaviour

[19] “The majority consider themselves more environmentally friendly than others” | Science News. Available at: https://www.sciencedaily.com/releases/2019/12/191219122523.htm

[20] “How Sustainable Brands can Connect with the True Champions of Their Cause” | Retail TouchPoints. Available at: https://www.retailtouchpoints.com/topics/sustainability/how-sustainable-brands-can-connect-with-the-true-champions-of-their-cause

[21] “Spanning the gap: an examination of the factors leading to the green gap” | Journal of Consumer Marketing. Available at: https://www.emerald.com/insight/content/doi/10.1108/JCM-05-2014-0988/full/html?skipTracking=true

[22] “Consumers in the circular economy” | ResearchGate. Available at: https://www.researchgate.net/publication/337085214_Consumers_in_the_circular_economy

[23] “What can consumers do to help solve the climate change crisis?” | World Economic Forum. Available at: https://www.weforum.org/agenda/2021/02/consumers-help-solve-climate-change/

[24] “How Gen Z and Millennials are putting sustainability on corporate agendas” | Jones Lang LaSalle. Available at: https://www.jll.it/it/tendenze-e-ricerca/workplace/how-gen-z-and-millennials-are-putting-sustainability-on-corporate-agendas

Author: Naomy Gmyrek

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