Shifting Demographics and The Future of Auctions - Carolina Auction & Realty

The Demand Side of Auctions

The best way to ensure the long-term viability of the auction business is to attract and retain financially stable auction buyers. With baby boomers retiring and starting to downsize, two generations comprise the bulk of these potential auction buyers over the next few decades: Generation X and Millennials. We need to cultivate these potential bidders on all fronts, from real estate auctions to estate and business liquidation auctions. By understanding some of the characteristics of these generations, auctioneers can improve the chance of getting these people interested in auctions.

Generation X: Worth the Auctioneer’s Efforts

Generation X—those born between 1965 and 1976—range from their middle 30s to early 50s. We don’t hear a lot about this group, probably because this generation is sandwiched between the baby boomers and millennials, the two largest cohort groups, who have received most of the attention. Pew Research finds that members of this generation aren’t just chronologically in the middle between large demographic groups. Members of generation X find themselves in the middle in many measurements, from political viewpoints and the age at which they have married to how they view themselves relative to the other generations. But this is not a generation to ignore, especially for auctioneers.

The U.S. Bureau of Labor Statistics recently set out to sort by generation the Department of Labor’s data on spending habits. The goal was to learn more about millennial spending habits, but the effort resulted in some interesting findings about generation X. It turns out, generation X outspends both baby boomers and millennials. And a recent Nielsen report shows that generation X spends more time on social media than millennials do. They spend, on average, over 31 hours a week on media with about 7 hours of that devoted to social media. They tend to embrace the do-it-yourself approach. They research brands and remain loyal to those brands that meet their needs. They appreciate honest and straightforward representations that they can verify. They like discounts. And they like independent reviews that help guide their purchase decisions.

According to research, generation X members are self-starters, they want to know things, and they love nostalgia. They frequently use YouTube.com to build new skills, especially cooking, home repair and improvement, technology use and repair, arts and crafts, and beauty and personal care. And they often buy goods and services featured in the videos they watch. Auctioneers can think creatively to focus on these aspects of this group to deliver more of what these people want.

Generation X members account for 31 percent of household income in America. They join loyalty programs to save money and receive awards. They particularly like the coupons and discounts that loyalty programs offer.

This tells us a few very important things about generation X. They have solid income. They are happy to spend their money. They’re fairly independent and use media, including social media, to learn how to do things for themselves. And they still have a lot of income years left. They are loyal to brands that earn and keep their attention. Auctioneers should be actively cultivating this group.

Millennials: A Tougher Sell for Auctioneers

We’ve all heard the generalizations about Millennials. They’re lazy. They’re so plugged into technology that they can’t form relationships. They refuse to grow up and are living in Mom and Dad’s basement because they can’t make it in the real world. They feel entitled and expect others to hand them success or, if they’re willing to work, they expect to advance quickly and be on top in a matter of months.

I decided to dig deeper and I was quite surprised at what I learned. Millennials aren’t exactly the ne’er do wells that these stereotypes would have us believe. Yes, their priorities differ from those of their predecessors but every generation differs from earlier ones. Still, the information on these up-and-coming people suggests they’re going to be a tough sell for those of us in the auction business.

Is a “Me Me Me Generation” the Future for Auctioneers?

In 2013, Time published a piece by Joel Stein called, “Millennials: The Me Me Me Generation.” In the article, Mr. Stein outlines some basic characteristics of millennials based on U.S. Census data. According to his research, millennials have far more narcissists than seen in other generations. They’re underachievers yet they believe they should be promoted regularly regardless of how well they perform in their jobs. They are obsessed with fame and fortune and rely on what feels right as their moral compass. Their lives center on technology and materialism.

Mr. Stein also suggests that technology has freed millennials from needing an established order. With the push of a button, they can publish writings, videos, and other information, thereby competing head-to-head with corporations, industries, and even nations. But their narcissism creates unrealistic expectations that are often not met. Their sense of entitlement can run into significant obstacles.

Perhaps because of their narcissistic tendencies, millennials don’t default to sarcasm and derision as a matter of course. They tend to be relatively content, positive people. They accept differences among people. And for the most part, they don’t have a bone to pick with government or big business.

Mr. Stein also offers some insight into why millennials behave as they do. Millennials can afford to delay major life decisions where there are so many new avenues for different types of jobs, where their social network is so large that they can meet—and marry—someone from anywhere in the world, and where longer life expectancies allow them to stretch their life planning over a longer period of time. They can afford to pick and choose so they don’t have to make quick decisions. They can be careful. They can be financially responsible. Their immersion in technology has also ingrained in them that there’s usually a better way to do something. This allows them to think in terms of improving things.

In an effort to improve employee retention, business leaders are learning to adjust their practices to accommodate millennial expectations. In other words, businesses are starting to give millennials what they expect and they’re finding that, in return, these employees are doing good work. Some may view this as the tail wagging the dog, but if it works, it’s worth consideration.

Auctioneers: Know Thy Millennials

According to the U.S. Census Bureau, millennials have overtaken baby boomers in numbers. But numbers tell only a small aspect of the story. Who are these millennials and are they really different when compared with prior generations? In a 2017 report titled, The Changing Economics and Demographics of Young Adulthood: 1975-2016, the Bureau provides a fascinating window into how young Americans have changed. Focused on people between the ages of 18 and 34, the research finds:

● Prior generations achieved in their 20s important life milestones including finishing school, securing jobs, and setting up their own households.
For millennials, these achievements are more commonly achieved in their 30s;
● More than nine out of ten young Americans say that completing their education and achieving financial success are important milestones of adulthood.
More than one third of 25-34-year-olds hold at least a college degree as compared with less than one quarter of this group in 1975;
● Members of this age group believe completing one’s education and achieving financial success are more important measures of adulthood than
marrying and having children. Members of this group still have families but they wait, often until they have completed their education and have
become established in jobs. In 1976, 69 percent of women were mothers by the time they were in the 25-29-year-old age group. Today, researchers
had to look at a higher age group—30-34 years old—to reach that same percentage of women achieving motherhood;
● One in three in this age group still lived in his or her parents’ home as of 2015. Of these young people, one in four is idle, i.e., neither works
nor goes to school. For the 28 million at the younger end of this group between 18-24 years of age, 16 million still lived with their parents.
Many others live with roommates or with an unmarried partner;
● In 2005, thirty five states had a majority in this age group living in their own households. Just ten years later, this number had plummeted to just
six states with a majority of young people living on their own; and
● More than 40 percent of younger households had student debt in 2013 versus 17 percent in 1989. Further, the amount of debt was almost three times as high.

In a snapshot summary of facts, Young Adults, Then and Now, the Census Bureau offers additional insights as of 2015:

● More millennials are likely to have a college degree;
● More millennials live in poverty compared with young adults in 1980;
● Though this is the largest generational demographic, millennials comprise a smaller percentage of the total population than baby boomers did in 1980
because the total population has grown so much;
● Young adults earn about $2000 less than their 1980 counterparts;
● 34 percent of millennials own a home. 66 percent rent;
● 55 percent live in single family homes. 40 percent live in multi-unit buildings; and
● Younger millennial homeowners (25 to 29 years of age) pay a median price of $139,900 for a home. Older millennial homeowners (30 to 34 years of age)
pay a median price of $160,000 for a home.

In a June 25, 2015 press release, the U.S. Census announced that millennials are a more ethnically diverse generational group than prior generations. The same press release shows that the most diverse generation is the youngest. Americans under five years of age is the first “majority-minority” generational group with just over fifty percent part of a minority race or ethnic group.

According to the Pew Research Center, 40 percent of workers between 25 and 29 years of age hold a bachelor’s degree as compared with 32 percent of generation X workers at that age and even fewer in prior generations. These college-educated millennials stay in their jobs just as long as their predecessor-generation group, did. Longer job tenure is generally correlated with higher education.

Moreover, millennials are moving less than their prior generational counterparts did. This surprised us because the statistics show that millennials wait longer to marry, buy a house, and have children, all things that typically hold people in place.

Nielson research describes millennials as people who prefer to live in an urban environment that provides everything they need, from music and art to shopping, dining, offices, and education—all within reach without an automobile. They are savvy shoppers who are always looking for a good deal. They are willing to pay more for “authentic, handmade, locally produced goods” and products from companies that are socially conscious. Over 60 percent, for example, are willing to pay more for a product from an environmentally friendly company because they view socially conscious actions as a substantive benefit of real value.

They prefer a personal and direct connection with a brand. Once they have that, they become advocates for that brand, often through social media. Essentially, millennials are more than happy to provide free marketing for those whose products and services they appreciate.

The median income for younger millennials (ages 18-27) is $25,000. For the older millennials (ages 28-36), median income is about $48,000. This explains, in part, why millennials are waiting to start families. But millennials care deeply about their families, their neighborhoods, and social causes. They can be a powerful influence in family decision making, including decisions about purchases.

They also appreciate art and music and put a premium on creativity. They respond to advertisements that use celebrities, characters they can relate to, or visuals that tap into their creativity. Millennials especially respond to music artists they like and if a particular company/product sponsors an event for that artist, millennials respond very positively.

Millennials haven’t yet reached their earning potential, so things are likely to change. But even though this group is working its way up the earnings ladder, these people want to contribute to causes. Most contribute at least a modest amount to a cause. Others raise money for their favorite causes. And more do volunteer work than prior generations. Among their favorite causes are education, poverty, and the environment. They use social media to evangelize these causes.

Millennials also report that they feel responsible for taking care of their aging parents. This is particularly interesting because those parents may call upon auctioneers when they elect to downsize. Given the involvement millennials have in decision making on purchases, if we can get them into our tent in numbers, they will know who to turn to when their parents make that decision.

Because of their emphasis on education, millennials have put themselves in debt. And that can spiral out of control if the pressure of student loans leads to covering living costs with credit cards. Perhaps an improving economy will help these people reduce their debt. More disposable income in the hands of millennials means more spending. The key, for auctioneers, is to entice some of that money into our industry.

How Auctioneers Can Market to Generation X and Millennials

We know that these generations are active in social media channels. This system they’ve embraced provides for promoting friends and others who have done things they like. By offering what they want, and providing positive experiences with a personal touch, perhaps we can convince these demographic groups to visit our auctions on a regular basis. I don’t pretend to have a lot of answers, but here are a few ideas worth considering.

Auctioneers might consider creating loyalty programs—memberships that reward frequent buyers. Generation X members are particularly engaged with such programs. Perhaps a discounted buyer premium based on total dollars spent per month, quarter, or year would interest these buyers. There could even be price rebates on auction-owned items being sold.

Most auctioneers can’t offer guarantees about products but many of us can do better jobs of describing items to increase buyer confidence, especially for those who can’t come to an inspection. We can also offer more shipping options.

We can create auctions that directly appeal to these groups and market them with the specifics they care most about. For a generation X crowd, perhaps we can tap into the do-it-yourself ethic and offer auctions that focus on materials and projects. Or, given their nostalgic leanings, maybe we can gather items that trigger nostalgic feelings and offer those in an auction dedicated to memories. For millennials, consider developing an auction that offers locally produced goods, environmentally friendly goods, or goods produced by companies with fair labor practices or those who donate to social causes. Even if we prepared one auction per year with such goods, the fact that we might do this can raise generation X and millennial awareness of auctions and what we offer.

Auctioneers can also use the millennials’ focus on social causes. One possibility would be to donate a percentage of the buyer premium to a local cause and advertise that plan well in advance of the auction. Millennials are particularly likely to share that information with others if the cause is one they find important, like a local shelter, a scholarship program for poor children, or cleaning up the local park. The prospective recipients are also likely to share the information, thereby marketing your auction for you. Others who appreciate the cause will share the information as they receive it, joining the social media blitz. Another possibility might be to advertise the donation of a percentage of sale proceeds if you offer items in your auction that you own. The same social media phenomena are possible. And don’t discount the possibility that your seller might be interested in donating to a good cause as well.

We might also try to educate millennials on certain older items that they show little interest in buying right now. Millennials particularly care about the environment. Yet they often buy basic furniture they can put together—things they’ve bought online that were shipped right to their doors. Even if a millennial were to consider an antique, the cost of transporting/shipping it could be substantial when compared with what a box store might charge to ship a dismantled fiberboard item. But those same millennials might just care that an eighty-year-old hardwood table will end up in a landfill if someone doesn’t give it a home. And if these old pieces are adding to the environmental impact because millennials are choosing to go with products full of glue and other solvents that affect air quality, might that affect their thinking?

As I learned more about these groups, I realized that we, as auctioneers, need to start thinking about how we can adapt our practices to encourage more millennials to give auctions a try. By adjusting some of our practices, perhaps we can interest these highly diverse groups in embracing the auction selling method. If we can do this, we could actually see an upward trend in valuations that have slipped to all-time lows in recent years.

Tom Jordan, Auctioneer, CAI, AARE, AMM, CES, MPPA, has been an auctioneer for almost twenty years. He is licensed as an auctioneer in North Carolina, Virginia, and South Carolina and as a real estate broker in North Carolina and South Carolina. He is the owner of Carolina Auction and Realty, a Raleigh, NC company offering online real estate, commercial equipment, estate, business liquidation, and benefit auctions. He holds a Bachelor of Science in Business Administration and is a graduate of the Certified Auctioneers Institute at Indiana University. He serves as the Vice Chair and Trustee of the NAA Education Institute and as Chairman of the Conference and Show Education Committee. In July, he will become the Chair of the Trustees and on the Board of Directors of the NAA.