3 Negative Effects of the Financial Crisis

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Copy created for the Progressive Leasing website published as part of a B2B marketing initiative. 

The year 2008 marked the beginning of a financial crisis that still affects Young Millennials today. It began when the housing bubble began its steep decline in 2006-2007. Shortly after, default rates on adjustable-rate mortgages and subprime mortgages began to increase drastically. These changes in the housing market affected retailers across the U.S. as well. They saw a decline in purchases of larger ticket items and fewer qualified for traditional financing options. 

The financial crisis that began in 2008 changed the opinions of many Young Millennials. They experienced the negative fallout themselves or by watching their parents and are hesitant to use credit and often fear debt. Bankrate's survey suggests this fear is not unfounded. 

1. Credit issues

  • Only 40 percent pay off their balances each month.  

  • They are more likely to miss payments completely.

  • A recent survey conducted by Bankrate suggests 63% of millennials don't have a credit card at all. 1

  • They defer major purchasing milestones like buying a home or a car.2

The recession caused many Americans born roughly between 1981 and 1996 to defer major adult milestones like purchasing a home or car purchases and delaying marriage.3 This also affects merchants selling larger ticket items often purchased by homeowners such as home furnishings and appliances. 

2. Weak job market

Lingering weakness in the millennial job market is not just a transient problem. The fact that millennials entered the job market at the worst time in modern history, not to mention the fact that employment opportunities continue to be below pre-recession levels, mean the financial crisis has left an indelible mark.4 Young millennials have less disposable income as a result and continue to struggle financially. 

3. Lower Income

The Federal Reserve’s 2013 Survey of Consumer Finances found that the median incomes of households headed by 18- to 33-year-olds fell 19% between 2007 and 2013, compared with the same age cohort in 2007. Across all age brackets, median incomes fell a more modest 12%. This comes despite the fact the millennial generation is the best-educated in American history.5

What does this mean for retailers?

Recently, Experian conducted a study that shows that 47% of YM will most likely use alternative lenders over traditional lending. They also discovered that 57% are also willing to use alternative and innovative companies and/or services. This data is crucial in understanding how to meet the needs of Young Millennials who often don't pursue traditional lending options due to credit problems but still want to purchase more expensive items.6

They may feel as though their hands are tied and may even avoid purchasing items they need but feel they can't afford. Retailers that provide alternate solutions may be able to drastically increase their revenue by tapping into this market. One alternate solution a retailer might consider is a lease-to-own option that allows a consumer with bad credit or no credit history to qualify for a larger ticket item. 

To learn more about how your retail store can solve lending problems for Young Millennials, download the full white paper here. 


Research

  1. Why millennials are often denied credit, Having little or no credit history often stands in their way., https://www.cnbc.com/2016/10/24/why-millennials-are-often-denied-credit.html, Jessica Dickler, Tuesday, 25 Oct 2016 | 9:30 AM ET

  2. This Is What the Recession Did to Millennials, This Is What the Recession Did to Millennials, http://www.cheatsheet.com/politics/this-is-what-the-recession-did-to-millennials.html/?a=viewall

  3. This Is What the Recession Did to Millennials, This Is What the Recession Did to Millennials, http://www.cheatsheet.com/politics/this-is-what-the-recession-did-to-millennials.html/?a=viewall

  4. This Is What the Recession Did to Millennials, This Is What the Recession Did to Millennials, http://www.cheatsheet.com/politics/this-is-what-the-recession-did-to-millennials.html/?a=viewall

  5. This Is What the Recession Did to Millennials, This Is What the Recession Did to Millennials, http://www.cheatsheet.com/politics/this-is-what-the-recession-did-to-millennials.html/?a=viewall

  6. Millennials and Credit: Survey Results, http://www.experian.com/blogs/ask-experian/millennials-and-credit-survey-results/