Echo boomers, Gen Y, the Millennial generation. There are as many names for the subset of Americans ages 6 to 25 as there are trends in the hallways of your local junior high school.

One thing is certain: They are many and they are strong. Estimates vary, but this generational cohort is usually pegged at just slightly less than the 75 million people who are called baby boomers — many of them the parents of the Gen Y group.

Clearly, these are the shoppers whose loyalty retailers and mall operators need to cultivate. The teenage slice of the market alone, l32 million people, spent $170 billion in 2002, according to Teenage Research Unlimited, a market research firm based in Northbrook, Ill.

Gen Yers “tend to spend a disproportionate amount of their disposable income because they don't have mortgages or college loans to pay off,” says Barbara Ashley, president of Retail Ventures. Indeed, 40 percent of Generation Y spending is devoted to apparel.

But capturing the children of the Baby Boom is not as easy as grabbing their parents, who grew up in the golden age of mass marketing. Although there are some common threads to unite them (see chart on page 28), the Gen Y audience is far more diverse and fragmented, according to Jones Lang LaSalle's recent report Gen Y and the Future of Mall Retailing.

Thirty-eight percent are nonwhite — 15 percent African-American, 14 percent Hispanic and many who identify themselves as multiracial. The study predicts that over the next 10 years, immigration alone will add 5.4 million people to this group.

And then there are the cultural and social changes that distinguish these young Americans from previous generations. Thanks to their racial diversity, as well as their familiarity with divorce and other alternative family structures, the members of Generation Y consider themselves more accepting than their predecessors of diversity.

According to an annual survey of more than 250,000 incoming college freshmen conducted by the UCLA Higher Education Research Institute, a record-high 59.3 percent of those polled agreed that “Same-sex couples should have the right to legal marital status,” up almost 10 percent from 1997.

In addition, this is the first generation that since its infancy has had access to hundreds of cable channels. Gen Y surfs the Internet, too: the UCLA survey found that 78.4 percent use the Internet for homework and research, while a majority also surf the Web for leisure.

These niche media allow the members of Generation Y to perceive themselves as more individualistic than an age bracket or ethnic category may define. These kids can choose their own identity, because their options are only a remote control or mouse click away.

“We have never seen a generation like this one,” says Greg Maloney, CEO of Jones Lang LaSalle Retail. “It's an exciting time for retail because the people who can figure out how to diversify and capture this market are going to be really successful.”

THEME IT UP

Rather than rely on conventional demographic tools, retailers and developers may do better by thinking of Generation Y as a collection of different psychographic groups, each with its own motivations and preferences. Important Gen Y subgroups include the punk, the computer junkie, the hip-hopper, the athlete and the pop culture fashionista.

For retailers and marketers, the first step is to choose one or more of these subgroups and create the merchandise and store environment that embraces that point of view. “It's no longer about being something for everybody, because you end up being nothing to no one. You end up being such a common denominator you wind up having no presence, making no statement,” says retail designer Ron Pompei, who advocates embracing a niche instead.

“Hot Topic would be a good example of” niche targeting, points out Robert Wendover, managing director of the Aurora, Colo.-based Center for Generational Studies. The company has stayed true to its punk theme. It constantly tests its hipness with shoppers via report cards located at its cashwraps, as well as on its Web site.

Moreover, “If you're not pierced and you don't have blue hair, they probably don't want to talk to you as an applicant for employment,” says Wendover.

The strategy has worked. Those ghoulish lunchboxes and black corsets all add up. Net sales for fiscal year 2002 were $443.2 million, an increase of 32 percent over 2001, and same-store sales showed a 5 percent increase.

Another notable Gen Y subgroup is the surfer-skateboarder. Pacific Sunwear, a chain of 611 stores, is a big player here and Tommy Hilfiger's new merchandising strategy is moving in this direction. Another mover is Abercrombie & Fitch's Hollister sub-chain. While the parent's fashions are more clean-cut and college-oriented, Hollister is all about California dreaming.

Begun in 2000, Hollister now has 93 mall-based stores that peddle the surf lifestyle through clothes and accessories, as well as the intangibles: Stores look like beach shacks, employees are encouraged to don swimsuits come summertime, and the music is parent-unfriendly. “These kids are buying into something, buying into a lifestyle, a club if you will,” says Thomas Lennox, A&F's director of corporation communications.

Hollister has also tailored its marketing to its target audience. Acknowledging that its customers perceive conventional advertising as too “corporate,” or sales-oriented, Hollister relies on word of mouth.

Besides the typical focus group, a common Gen Y marketing technique is to infiltrate school social networks in search of the king (or queen) of cool, and handing that person a product. If it plays well with that kid, pretty soon, a school full of devotees will follow.

For developers and owners of retail real estate, the Generation Y puzzle is more complex. Obviously, the key is to choose a tenant lineup to appeal to as many members of this important demographic as possible.

GENERATIONAL GENERALITIES: Some Shared Traits
Baby Boomers Generation X Generation Y
Born 1946-1964 Ages 36-55 78 million Born 1965-1976 Ages 26-35 43 million Born 1977-1994 Ages 8-25 73 million
Diversity as a cause Idealistic Mass movement Conform to the rules Killer job Became institutions TV Have Technology Task-focused Ozzie and Harriet Other boomers Accept diversity Pragmatic/cynical Self-reliant/individualistic Reject rules Killer life Mistrust institutions PC Use technology Multitask Latch-key kids Friends — not family Celebrate diversity Optimistic/realistic Self-inventive/individualistic Rewrite the rules Killer lifestyle Irrelevance of institutions Internet Assume tech Multitask fast Nurtured Friends = family
Source: enterprisingmuseum.com, Jones Lang LaSalle

CHOOSE WISELY

And that means crafting a collection of inline stores, rather than counting on the younger set to enter the department-store anchors (unless dragged there by a parent). According to market researcher Cotton Inc., 42 percent of 16- to 19-year-olds prefer shopping at specialty stores, compared to 12 percent of people ages 20 to 55, regardless of gender.

Even as department stores fall out of favor with teens (see The Last Word, page 96), inline shops are geared to them more than ever. J.P. Morgan analysts Brian J. Tunick and Robert Samuels examined the composition of 50 major U.S. malls, and determined that the square footage devoted to teen concepts comprised 8.6 percent of their total square footage in 2001, up more than 5 percent from just four years earlier.

What makes teen-oriented tenanting so tricky, of course, is the speed with which tastes change. Take Kode, for instance. The concept, created by Oakland, Calif.-based Talking Drum, was to market cell phones and services to teens by providing a cool hangout.

The prototype opened in Sacramento, Calif., in 2002, with plans for a national rollout. O + A Studio, the architect, created a 1,500-square-foot space in a strip center space that could also be used as a dance floor.

On Friday nights, there was a DJ, and frosted windows shielded patrons from the prying eyes of older shoppers. Instead of the traditional channels of advertisement, marketers pasted Kode's insect logo in unexpected places.

Despite echoing many of the anti-establishment, underground themes of Hot Topic, and using a guerrilla marketing campaign like Hollister's, Talking Drum's backers, Samsung and Motorola, pulled the plug on the store after six months of operation (blaming the dot.bomb economy).

The real lesson is this: Fall out of step with the latest trend, and your Gen Y customer is off to the next thing. “Research is key,” says Maloney of Jones Lange LaSalle. “If you want to stay ahead of the wave, your research has to be current and continual. If you think research has to be done once every six months, then you're six months behind.”

STAY LOOSE

Flexibility may help, too. With retail concepts hot today and not tomorrow, both retailers and real estate owners and developers may have to think about short-term relationships with retailers in order to build long-term relationships with Gen-Y clientele.

“Most baby boomers don't like change; Gen Yers love change,” says Maloney. “So we suggest not doing 10-year deals with these types. Maybe it's a two- or three-year, maybe it's a license agreement to see how that customer is accepting the retailers.”

What may be a boon to short-term or even specialty leasing not only enlivens the mall with a constantly changing tenant lineup, but it also reflects trends.

Last year, for example, Wal-Mart announced an exclusive agreement with the Olson twins to sell sportswear, accessories and cosmetics.

And last month, Motorola and the Phat Farm and Baby Phat brands teamed up to begin production of hip-hop cellular products. For Gen Y, the possibilities seem endless — but not permanent.