The €340 Billion Millennial Spending Gap: the difference between actual and potential ethical-consumerism
Millennials are willing to spend much more on sustainable products than they currently do. This represents a huge, untapped gap in ethical consumerism. Understanding what and why millennials perceive as ”ethical” is key to tapping the market.
In part 1 of this 2-part blog, we looked at the global distribution of ethical consumerism among millennials in response to a question sent in by a reader. In part 2, I want to answer another interesting question that was posed by another reader.
In my original blog-post on the Millennials as ethical consumers, I quoted a study by Nielsen claiming that 73% of millennials are willing to spend more money on a product if it is sustainable. In response, a reader asked:
“Is there any data highlighting the difference between how much they are willing to spend and how much they actually spend on sustainable products?”
So, I did a bit of digging.
I was unable to find any direct statistics that answer the question definitively. Because millennials are quite a new phenomenon, the body of research on their spending still seems quite small – albeit growing. Nevertheless, I have done my own research, looking at different data sources to work out a rough estimate.
Now, this is only an estimate and should only be considered a very rough guideline that should be taken with a generous pinch of salt. Roughly, then, the answer to the question is €0.34 trillion, globally. That is a lot of untapped potential income from this growing market segment.
Let’s break it down.
How Much Do Millennials Actually Spend on Sustainability?
Currently, global spending on sustainable products is approximately €1.57 trillion. According to Unilever, 33% of all global spenders already buy sustainable products. And according to the Financial Times, Millennials account for approximately 35% of all global consumer spending. So, if we assume that millennial sustainability spending is also 35%, then their sustainability spending is €0.55 trillion. It is actually more likely to be a higher proportion than this because, as we showed in our previous blog, they are more civic-minded than other demographics. But let’s stick with this number for now.
How Much are they Willing to Spend?
The same Unilever research shows us that 21% of all global spenders are willing to spend more on sustainable products. Assuming this 21% will spend an equal amount on sustainable products as others, this amounts to a potential €0.96 trillion of untapped spending. And assuming millennials represent 35% of these potential spenders, their potential untapped spending on sustainable products is €0.34 trillion. (Again, it is actually more likely to be a higher proportion because they are more civic-minded than other demographics). Add this to their current spending on sustainability (€0.55 trillion) and we have an idea of the potential size of the global market in sustainability spending. In total, then, millennials are willing to spend €0.89 trillion globally on sustainable products.
So, based on a series of assumption, we can estimate that the difference between millennials’ current spending on sustainable products and potential expenditure is €0.34 trillion.
But You Need a ‘Why’
However, this figure is meaningless if you don’t understand how to convert willingness into actual sales. Closing that gap requires an understanding of how and why millennials are motivated by sustainability. As stated in the original blog post, the cultural difference behind millennials’ motivations to buy sustainably are extremely important. The key to closing this gap and tapping into millennial ethical consumerism lies in their cultural values, buying practices and brand trust.