The Future Of Consumer
Live From Brooklyn NY
Keynote presentation of The Future Of The Consumer & The Coming Impact Of Gen Z
Live From Brooklyn NY
Full Speech Transcript:
So, I spent the last 10 years speaking about the impact of millennials, and everyone wanted to know why. Why the millennials are so important, why are they so different? Well in my mind, millennials are a different species to every human that was alive before them. The reason why is because they were the first generation to grow up with internet in the household.
If you think about the access to the information, the way you can communicate with other people. The intuitive knowledge of technology to disrupt industries that have been around forever, this species is unlike anybody else before it and the world will never be the same way again. People often ask me about Gen Z, how that's going to be more than Gen Y, I think it's more 'millenialness' I think this break is unlike any other break that we've ever seen. It's impacted a lot, it's impacted business culture. It's impacted the geo-political landscape, it's impacted economics but it's really impacted the consumer, I think, the most.
The way that brands, advertisers, small businesses, large businesses go to market aren't the same and the problem is, especially with big companies, the sweet suite is not filled with millennials yet. It's filled with people who did not grow up with the internet in the household. So, they are making decisions based upon a legacy world, based upon their rear-view mirror and that's why you see companies like Kodak going out of business. Because the people that are running those businesses intuitively don't think to make those decisions. Think about a company like Netflix, when Netflix first started they were shipping out DVDs, and Reed Hastings, the CEO, said, "You know what? I don';t think this business is going to last. People aren't going to have DVDs in 5, 10, 15 years from now."
So what did was he cannibalized and disrupted his own business and shifted to streaming. He was able to go three steps back to take 20, or 50 or 100 steps forward. Most businesses today, especially ones that are publicly traded, would never do that. They're too scared, they're too much thinking about the short-term. So what I implore in all of you guys as audience, no matter what you're doing is, don't be romantic about the future. Don't hold onto the past, embrace what's moving forward.
And what's moving forward is really these 10 lasting legacies that the millennial generation have left. So, I'm going to talk to you about 10 things that are never going to the same, as a result of the millennial generation. Are you guys ready to go?
Number one: Status update is the new status symbol. In the '90s, in the early 2000s and every year before that, consumers would build their personal brand and status by stuff. The cars, the houses, the watches, the sneakers, people would roll up in their suburbs with their Lexus and it would be a status symbol. Stuff and brands made people portrayed a certain way in society, but then a little thing called Instagram came about, and when Instagram came about, all of a sudden you had something different than stuff to build your own personal brand, and to build social currency.
It was experience. If you sat front-row at a game, if you hung out with the DJ, if you saw a celebrity, if you traveled to a far, remote place. All of a sudden those experiences could be shared at scale. Before that, I could only show my pictures to whoever was directly in front of me, right? But now all of a sudden, my experience is the new social currency and now the status update is the new status symbol and it's caused a lot of major trends. One of which I wrote about in my book called 'YOUTNATION', called 'DIFTI' which stands for, 'Did It For The Instagram' And that experiences are so powerful and important to building somebody's brand, that a lot of people actually pursue experiences just to show everybody else they were there, versus actually enjoying the experience.
We've all been at concerts where people, instead of watching with their own eyes in the high def, are watching through a phone, which they're gonna share which nobody's gonna watch anyway. Because they ultimately have an inner need, a desire to share that they were there. So 'DIFTI' is really changing the world, it's making people do things for a whole different reason. For right, or for wrong. This is Mission Peak in Fremont, California. Who's been there? Anybody in the audience?
Well, Mission Peak's been around for a very long time, because it's a mountain, but in the less 4-5 years Mission Peak has been plagued by pollution, complaints by local residents, lack of parking. Why? Well it's not that hiking has been ultimately that much popular in the last 3-4 years, but Mission Peak is conveniently located within two miles of two major highways. This hike, while it looks like it was a major climb up a huge mountain, is really only a 15 minute, slightly hard trek up a mountain. All of a sudden people climb, and there is a pole at the top for people to take the ultimate selfie. Everybody now wants to be a hiker. Well, actually everybody doesn't want to be hiker, everybody wants to portray that they climbed this mountain, and that is really case in point of what 'DIFTI' is doing.
I ran a panel of millennials, I rounded them up in the wild and I brought them on stage and I actually said, "Hey millennials, tell us some of your favorite apps that we haven't heard of before." And a bunch of them talked about travel apps, like 'Get the Flight Out' Well, 'Get the Flight Out' is on Friday morning, you can search the furthest place possible you can travel for the least amount of money. Oh, it's only $179 to go to Budapest? I guess we're rolling with Budapest. Why? Because it's another adventure, it's another thing to check off the box, it's another thing to share on Instagram to portray their personal brand.
This is 'Color Run', it's reinvented the fitness space, there's a company called Ballys out of Chicago, it was a great gym, it had great machinery, it had traditional membership program. Well guess what? That wasn't enough, Ballys is now bankrupt. What is the new fitness? It's Soul Cycle, it's Barry's Bootcamp, it's Tough Mudder where people spend $350 to climb in freezing cold water, under barbed wire to show everyone, "I'm rough, I'm rugged. I'm not the traditional corporate suit, I can roll like that." Or Color Run, people show up wearing completely white shirts and all of a sudden, they're doused with colorful powder, creating that perfect Instagram moment.
When you watch people running the Boston Marathon, they're not holding out their phones, but at Color Run you better be sure they are. Everyone has their phone there. The race is un-timed, at the end there's a DJ, people are treated to a live concert. The new fitness, even, is experiences. Number two is something that couldn't be more relevant than it is right here in Brooklyn, which is the inner-city will be dominated by the creative class. The notion of the inner-city blue-collared worker will never be that way again. Instead, the inner-city has been taken over by the creative class, and the livable boundaries of cities are getting pushed further, and further outwards. I can tell you that this neighborhood looked nothing like this neighborhood 10 years ago, and looks nothing like it does 10 years from now.
A big reason why is urbanization. The traditional version of the American dream, getting in a car, driving to the suburbs, having that nice house with a picket fence and a two-car garage, right? That's taken a U-turn. The future consumer has no interest of living in the suburbs, the real estate prices in Brooklyn over the last 10 years were over 100% while they flattened out in the suburbs. Why? First of all, people that are older can see what younger people are doing and live in a 24 hour news cycle, and the action is not going on along West Chester or Long Island, it's going on right here in Brooklyn, in this city. So people want to stay where the action is. Schools are becoming better, cities are becoming safer and cities create the environment that people sort of imagine for themselves in this new world.
It's also changing the landscape of cities. I did mention earlier areas that were crime-ridden 5, 10, 15 years ago like many neighborhoods right here in Brooklyn, are being replaced by multi-million dollar townhouses. We call that 'Gentrification', it's happening. Whether it's good or it's bad, it's happening, I would argue there's a little of both, and when gentrification happens, when the terrible story of the mom and pop shop goes out of business because of Amazon. One of three stores generally opens up, one is a Starbucks or a quick-service restaurant because right now, they're Amazon-proof and people need their coffee or to eat right away. Two, is a bank, because even though we're entering a cashless society, we're not there yet, and people still like to go to the ATM, or go to a banker and get their money, and number three is a pharmacy where you need your convenience, stuff that you need within the hour.
But anything else, Amazon Prime, Amazon Prime now is going to deliver it to you. So, the future of retail will obviously never be the same way again, and when gentrification comes in, this is what you usually see. Another byproduct of urbanization is people are getting married later, and later and later. Bunch of reasons why. Number one is obviously Tinder, we all know that but since people are staying in cities, it's more expensive to stay in cities, there's more two-income households, people are pushing off starting a family later. So, the notion of the young mom, the CFO of the household is actually getting older and older, and older. People are in no rush to get old. A lot of people think that marriage is the first step in that direction, and that's why people are getting married later and later, and we're seeing that through the demographics.
Number three, services will continue to make us buy less stuff. I would argue the one that Steve Jobs got wrong, is he said that people would actually want to buy music and not actually access or rent it, and the fact is there's only so many times that somebody can listen to the song 'Despactio'. So as a result, you have the streaming services like Spotify and Beats, which would then get acquired by Apple. People would rather access to music, than buy it. Access, over ownership, but that actually is not just limited to the music space. And it's really driving, again, further deterioration of retail, and it's actually driving further deterioration in almost every category.
First, obviously cars. The cost of cars, compound with the cost of gas, tolls, parking and insurance. For people who live in the city make owning a car just not something that makes sense anymore. People would rather access their vehicle, than own it especially with the ease and ubiquity of Uber. You have houses, you have Air B&B where you can rent out your apartment when you travel, and rent out someone else's apartment. The rite of passage of owning a home, the bedrock of financial stability is for a lot of people, especially who stay in the city, no longer in reach.
It used to be you could come out here to Brooklyn and here in Greenpoint and buy a place, well most young people, that's not even an option anymore. So buying real estate isn't an option, and with all the money that they're saving by not buying houses, and not buying their cars, they're putting towards experiences. So they can actually have that status update as the new status symbol. Services are also impacting kind of space of going mainstream in major cities. There's a company called 'Glam Squad' who if you want to get a bunch of girls, they get their hair done, a blowout, makeup, et cetera, you don't have to go to the salon, the salon will come to you. For Glam Squad, they have an incredible business model. They no longer have to pay main street real estate fees, and for the consumer, super convenient, super easy, saves time.
Anything that saves time right now for the consumer, is very likely to win. This is 'Rent the Runway' Traditionally a young woman would buy a very expensive, $1500 [inaudible 00:10:37] dresses, right? To go out for the big night out. Well now you can rent that dress for $100, take an Instagram with it, no one actually knows that you don't actually own it and actually happily give it back. And there's plenty of better things you can do, saving that $1400. Rent the Runway is exploding, based upon access over ownership in the apparel space. It's hitting every single category, owning stuff just isn't cool anymore, and we have less space to keep all the stuff in.
Again, positives and negatives towards society, but the future for sure. Number four, the global middle-class will likely continue it's rapid evaporation. The middle-class is rapidly eroding, I travel all over the country and all over the world, and when I'm on the coast it's a whole different world to when I'm in the Middle America. When I go to a place like Cincinnati, and I go to the nicest hotel and in the lobby, there's locks on the doors to keep the homeless people out. Then I know actually that the world is really changing, because jobs are getting offshore'd and outsourced in Middle America and it's dramatically decreasing the middle class.
For the first time since the roaring '20s, .1% of the population in the United States controls nearly 25% of the wealth. The top 10 richest people in the world actually have more money than the bottom 50% of the world. So we're actually seeing this big divide, obviously driven by the internet and it's creating 'haves' and 'have nots' And it's creating a barbell economy. And what I'm telling business is, "You need to pick a side." You either have to be a super luxury brand, or you have to be a super value brand, but you actually can't be in the middle. This is Miniso in China, the equivalent in the US to Dollar Store, Dollar Tree, Dollar General. These big retailers that are selling stuff for a dollar, or two dollars, playing to the value sector.
Walmart, 'Every Day Low Prices'. Visio, selling flat screens for $199, these companies are winning in this new economy, because they're winning by supply chain innovation and giving the best product for the lowest possible price. On the luxury side of the equation, no shortage of luxury companies. Jet Smart are a private jet rental company. Blade, a company that shuttles people from here in New York to the Hamptons for $600 versus actually getting in the car. Four Seasons, Armaan Resorts, companies on the luxury side. Apple, which just recently just announced the Apple X is going to be a $1000 for a phone. They're playing to the luxury space, but who's losing? Companies in the middle. The Gap just announced they're closing 40% of their stores, well why? The value sector, they can't afford to shop at The Gap. They're not going to buy jeans for $50. The luxury sector? They're not going to buy jeans for $50 either. They're going to buy Citizen's jeans, or J-Brand for $200. The Gap finds itself in the middle.
If you are in the middle, you are going to die because there is not a market in the middle anymore. The Gap also owns a company called Old Navy, they're doing perfectly fine because they're playing very well to the value side of the equation. So in a barbell economy, you need to pick a side. Number five, brand will be built direct, or no longer built at all. Working with a variety of brands, what I'm finding is so many companies have no idea who their consumer is, because they've never actually needed to talk to their consumer. As long as these big merchants have been able to sell their products to Walmart or Target and consumers would walk by it, and grab it on the shelf, put it in their cart and put it in their SUV and drive to their house, those companies will win.
But now what's happening is Walmart and Target are creating their own brands, because their margins are getting squeezed and consumers aren't going to retailers as much anymore, which is forcing retailers to think about how they're actually going to go direct to consumer, how they're going to sell their product and most of the big traditional brands have no idea how to do so, because they don't even have data on their customer, they've never had to. As long as they can go to Bentonville and sell more pallets to Walmart, they were fine. So there's a new world of companies that are taking off, that are cracking direct to consumer.
Like Warby Parker, which is basically taking on a huge giant in the eyewear space called Luxottica. They've understood how to build direct relationships with their consumers, getting data, top-class customer service and then they're building a retail for print on top of it, but not the other way around. They've cracked direct. Another company that really intrigues is a company called Away, selling suitcases for $200 with an iPhone charger actually built in. Not going through traditional retailers, understanding who their consumer is, using new world channels to actually communicate and disrupting the space.
And a lot of people are even questioning what brand even means. This company really interests me, it's called Brandless, they just raised $50 million in funding and their whole take is consumers don't care about brands in low involvement categories. Whether it's the luxury or the value side, it doesn't matter what your brand of maple syrup is as long as it's the best possible ingredients. They aren't advertising, they aren't building brand, they're putting the best possible ingredients into their products and they're selling everything for $3. Basically saying brands don't matter at all.
Number six, we will seek gigs instead of jobs, and education has changed forever. The freelancer economy, the gig economy, the notion that individuals in specialized skillsets can have an enviable careers is unlike anything we've ever seen, right now. If you can go deep into an art, meaning that you're creative, that you're a designer, you can do something that machines can't, or you can go deep into a science. You can operate the machines, you can become a freelancer and go direct to the companies that are buying you, and have an enviable income and the freedom that this generation really wants.
The average company in the Fortune 500 in the '60s was around 30, 40, 50 years. Today the average company's is 10-20 years. There was no longer a short path of working your way up the corporate ladder anymore, and people are realizing that and it's causing a boom in things like collaborative workspaces, like WeWork, which is now's fastest tenant of commercial real estate in many major cities around the world. WeWork allows me to rent my desk next to the guy in the blue shirt and pay $150. He could be a designer, the woman behind me could be a coder, somebody could be a YouTube search engine optimizer, we can basically share resources, we can network.
I have a massage therapist, I have a receptionist, I have a conference room, I have culture that rivals Google and I can do it for $150, $200 a month. So that creative class is going towards the freelancer economy, they did not want full-time jobs anymore and what's happening is big companies are taking suit, they used to be in the suburbs in these huge suburban enclave like Coca-Cola, or rather Pepsi being in Purchase, New York or Microsoft being in Redmond or Visa being in Foster, Sydney they're all moving back into the cities, and they're contracting their work forces so they can save money and actually have addition through subtraction, and they're actually going to where the millennials are, where the talent is. So while companies used to move out to the suburbs for tax advantages, now they're actually moving back in.
Number seven, typing will go the way of hieroglyphics. I had a huge argument with the teacher a couple of years ago saying, "They should not teach handwriting in school." And she got really offended, and I just called her the other day and said, "Guess what? I actually don't even think they should teach typing in school." Apple last week announced an Apple Watch that has LTE built-in, when you want to talk to that watch and tell it to send an email, you're not going to type on your watch, you're going to talk. Voice is the future, typing will be gone in 3-4 years, full-stop. So while you don't trust Siri right now, you're going to trust Siri a lot more in 3 months and incredibly more, probably more than a person in three years from now.
So that the way we enter information is going to be through voice, and the biggest companies in the world, they already know that. That's why Amazon's pushing Alexa, Google with Google Home, Microsoft pushing Cortana, Apple pushing Siri. Four of the smartest companies in the world because they know that voice is actually the future, but this notion of voice is changing consumerism forever, because guess what? If I had an Amazon Alexa in my house and I say, "Alexa! Buy batteries." Amazon Alexa will say, "I will send Amazon basic batteries." And I say, "Amazon, I want Duracell." And Amazon Alexa says, "I will send you Amazon basic batteries." Because what Amazon is actually betting is that the convenience and ubiquity of voice trumps brand.
And if Amazon now can sell their own products in the low-involvement categories, people don't even care about the brand. So voice is having an insane impact on so many industries, I worry about Google's future, I don't actually worry about Google because those people are doing fine, but if I search into a phone, speak into it, I'm not going to type in 'Google' anymore. I'm just going to talk. Siri, where's the closest Starbucks? "There's 30 within one block away." That's what it'll come back and say to me, but who delivers that search? It could be Google or it could be anybody, because I'm not looking at the Google logo.
So in a world where visualization can go away for so many transactions, what's that going to mean to the power of brands? The future, the phone works a lot like this, air pods, computers built into earphones and the movie Her, right? You guys saw it, if you haven't, you should see it. Guy falls in love with his phone. Number eight, fame is forever completely democratized. The notion of fame has changed forever, what a lot of big companies don't understand is Tom Hanks, and Tom Cruise and Angelina Jolie and the Hollywood A-List matters infinitely less to this younger generation than the people who they watch everyday on YouTube, like Dan BPM, right? So those are the new stars that actually matter, and these people have not gone through traditional channels.
They have gone through their own path and their fame is completely democratized, and the new version of the star is the YouTube star, where people are homegrown and I hate to say it but the best example is the Kardashians. They have built an audience so enviable but actually exposing their lives in every way, shape and form, obviously, and then they use social media to offer a voyeuristic peek into what they're doing. And in doing so, they have built an incredibly powerful audience, where if they post fig tea or flat tummy vitamins on Instagram, the websites crash because they sell out so quickly.
So the word 'influence' is thrown around a lot, but influence is when you can actually sell stuff, and no one can sell stuff better, using the power of their fame, than the Kardashians. And individuals are actually the new network, especially in a world of Instagram Live where celebrities are actually going on live. Justin Bieber, he wakes up in the morning, he puts his phone in, he lays there, he takes his time to get out of that bed and as he's staring at his phone, the audience goes through 50 thousand, to 100 thousand to 200, to 250 thousand people. If he picked anything up at that moment, he'd be able to sell anything.
So celebrities control so much, moving forward because they are the new networks. If you wanted to get a message out, you wouldn't call Sumner Redstone or Rupert Murdoch at Viacom or any major network, you would actually ask the celebrities themselves because their audiences are bigger and way more powerful. Number nine, and I've been saying this for 10 years and it actually just came true as well, with the Apple announcement. It's that TV will become a giant iPad hanging on your wall. Young kids first of all have no idea what a TV network is, they have no idea what ABC or NBC or what Fox is. That does not even compute to them, it's like rotary phones to the Gen X'ers, it doesn't make any sense. Apple just announced, as did Amazon three months ago, that they're actually going to be selling a TV. I've had this graphic up for a very long time, now this graphic is real.
The TV is going to be a giant iPad on your wall, and it's going to look a lot like AppleTV. So this is what AppleTV looks like today, but tomorrow this is what AppleTV's going to look like. Where individuals are going to be in your network, live sports, which the NFL by the way is the largest force which we've ever seen in media, because that's the only the thing that aggregates eyeballs in a live format, on an ongoing basis, and big shows are going to go direct to consumer.
What I question in the barbell economy, if I can either pay to see the show without commercials or get it for free with commercials, does that only mean the value side would even be subjected to commercials whatsoever? What happens when Joe's Pizza can advertise during the Superbowl to everybody within one mile of their Duluth, Minnesota location because you can buy everything programmatically. Because the consumer, when they're watching the giant iPad on the wall, is going to be doing so in a logged in, Facebook state. So everything that they get targeted is going to be towards them as an individual. It's what we call a dressable, or a programmatic in the advertising industry, that's going to change television forever.
And number ten, four companies do and will continue to run the world. When I wrote my book three years ago, I spoke about these four companies that are probably going to have to get broken up by the government. You probably saw the news yesterday that Facebook had information subpoenaed for what they've actually taken in terms of their advertising from the Russians during the election. The government's going to start meddling in these companies, Donald Trump is no fan of Jeff Bezos, that we actually already know. These companies have an infrastructure, an ecosystem, a power unlike none others and in the barbell economy, the people of that on the right side of the barbell, the people that are tracking the value are people that can play in this ecosystem.
Touching Google in terms of how you reach people at the beginning of the funnel. Touching Facebook in terms of how you drive brand love and how you actually engage with them. Touching Apple in terms of how you get your new mobile device. Touching Amazon in terms of how you sell stuff. That's the future of business right there. That's the future of every single category, you name the category. Everything you should do in business should be evolving around these four companies. I'm not saying it's great, and maybe there'll be another fifth, I think Microsoft on the B2B side still have some life in them.
But there's not that many where there's a huge drop of ... Thankfully, for all of us who live in this country, they're all American companies. Besides Alibaba and Tencent, most of the innovation is still happening in the US, which is why we really need to foster and fuel our innovation. From everything from our political views as well as to education.
So those are the 10 lasting legacies. What's next for Gen Z? Well that's frankly a whole 'nother presentation, I'm usually given 40 minutes but I was only given 20 so you'd have to follow me and check out what I think of Gen Z. It's all I got for you guys today, my book's YOUTHNATION, I'm Matt Britton, you guys wanted to hit me up, here's how you do so. Thanks so much.