By 2025, the majority of young people in the workforce will be millennials. Hence, the significant importance of millennials for SMEs in 2023.
A McKinsey study suggests that the purchasing and consumption habits of millennials differ substantially from those of other age groups.
They are less brand loyal, their preferences are fragmented, and they are comfortable shopping online. Perhaps the most alarming aspect for large companies is that millennials are four times more likely than baby boomers not to buy products from large food companies. Size has become somewhat of a problem.
Additionally, millennials are attracted to offers and discounts, in part because their resources are more limited than those of previous generations. For example, when members of Generation X were 27 years old, their income level was 9 percent higher in real terms than that of 27-year-old millennials.
In response to these trends, producers and consumer goods marketers are offering young people more brand and product options (and lower prices). In fact, millennials have recaptured some of the lost “consumer surplus.”
In recent years, almost 70 percent of growth in almost all sectors has come from small and medium-sized brands.
Smaller brands are capitalizing on millennials’ preferences and the opportunities presented by digital marketing. Small businesses, in general, are agile and react quickly to market signals, giving them an edge over larger companies.
This doesn’t necessarily mean that small businesses are better at innovation. Brands launched by small businesses do not have higher survival rates than those of companies with sales over $1 billion: in both cases, it’s around 25 percent after four years. In reality, the issue is that there are so many small businesses that collectively outpace the larger ones.
Smaller competitors are venturing into all attractive market niches and capturing most of the growth. In fact, the investor community has responded (and contributed to financing) this dynamic, with investment levels jumping from $500 million annually (average 2010-2013) to almost $1.8 billion in 2014-2017.
Today, the agility of SMEs, considered together, is outpacing large companies in terms of organic growth.
Thus, we can conclude that “The swift overtake the slow,” and these are some of the reasons why SMEs have taken the lead so far:
