Every time I see a reference about the new American consumer I think of a post 9/11 The Onion article: A Shattered Nation Longs to Care about Stupid Bulllshit Again.
Events like 9/11 and the recent economic collapse can certainly alter consumer sentiment- especially in the short term. But life stage transitions matter more! And the best lens for understanding the future of US consumers is not ‘post economic crisis’ (event lens) but through the inevitable phase transition (developmental lens) occurring within the US Baby Boomer cohort as they approach their retirement years.
Soul searching or Aging?
It is a great time to be writing and talking about the future of the consumer mindset! And with good reason – consumer spending drives economic activity in the world’s developed economies, and is turning out to be the focus of fiscal policies to empower the expanding middle classes of China, India and Brazil.
Why so much activity around the future of consumption? Because we’ve experienced another event! [Futurists focus on 'trends, events and choices'] Ten years ago we wanted to know the future of consumption post 9/11 and now we are now trying to get our heads around the post economic collapse consumer mindset!
And the most important consumer segment for businesses and economists to watch remains the US Baby Boomer (sorry Millennials, Gen X and Asian consumer!) [See share of spending by 50+ in McKinsey's 50/50 report]
There is no doubt that consumers appear to be pulling back or redirecting their discretionary spending. The question worth exploring is: Will this phase change be driven by consumers waking up from an era of mindless consumption or will the real driver of change be their anticipation of pending retirement years?!
Lens One: Consumers have seen the light, and want to change their ways! (Brands beware!)
John Gerzema, co-author of The Brand Bubble, delivered a thought provoking TEDx talk in which he frames this post-crisis consumer environment as “The Great Unwind driven by the empowered consumer. Gerzema delivers a solid presentation with powerful lines that speak to shifts in branding identities and relationships: ’…businesses must provide values, not just value‘, consumers are ‘moving from mindless to mindful consumption’, consumers are de-leveraging, ’seeing rise of ‘cooperative consumerism’ and ‘variable spending’ living’.
Credit to Gerzema! He delivers solid insights – especially for near term marketing campaigns and longer term strategies on how brands can remain relevant. But I think there is something more fundamental happening here that will require the transformation of industry sectors as we brace for the impact of inevitable lifestyle shifts associated with aging and retirement.
Lens Two: Consumers are just Closer to Retirement (Industry sectors beware!)
What really matters is not the ‘event’ induced sentiments of consumption, but the new normal dynamics associated with life-stage transitions. And the aging of the Baby Boomer population means less discretionary spending (per capita) as they shift from salary to asset-derived incomes, fewer children in the homes of wealthiest households, and the emergence of new priorities associated with spending on health and wellness.
We are at the end of a 40 year long consumer era that can be charted in lock step with the life stages of the Baby Boomer consumer economy (e.g. from rise of shopping malls, Mini Vans/SUVs, credit card spending). It was a unique era shaped by some profound changes across the spectrum of: social (e.g. role of women), economic (e.g. credit markets; second homes) and technological (e.g. consumer electronics) domains.
But 2011 marks the beginning of another phase transition: the Baby Boomer retirement years that will stretch through 2029. And there is a great deal of uncertainty among consumers, companies and policy makers as to the challenges and opportunities ahead.
A few thoughts to consider… and resources to explore:
Industry Challenges:
- Paying for Quality of Life: Boomers are likely to place more focus on quality of life goods and services. The challenge will be paying for it!! There is a gap ahead that must be confronted between aspirations for ‘the good life’ versus the financial capacity to live another 10-30 years without real income gains.
- Managing Government spending: Public dollars spent on Social Security and Medicare alone will increase from about 7 percent of the total size of the U.S. economy to almost 13 percent by 2030 and to more than 15 percent by 2050, (Ben Bernake, 2007)
- Sustaining economic growth: [A retreat of Boomer spending] ‘…could stifle the economy… and knock U.S. growth down from the 3.2% it has averaged since 1965 to 2.4% over the next 30 years. “We would have gotten here in 5 or 10 years as boomers retire, but we pushed it up.” McKinsey Consulting: [Business Week, 7-23-09]
- Financial Services: How will the financial services sector respond to lower risk investment appetite of Boomers? What types of innovations will emerge around structured instruments for retirees?
Industrial Sectors Opportunities
Industrial sectors that will serve aging markets will tap a blend of hardware (goods) and software (services). The challenge will be scaling and keeping costs down to capture the entire spectrum of the Boomer market [See: McKinsey 50/50 report].
- Web-based Platform Delivery - The web will continue to evolve as a platform for businesses to reach and serve aging populations. Expect big opportunities to emerge around video, voice, sensor-based wearables and location based web experiences
- Home-based Healthcare- Institutional healthcare will not go away- but new players in the fields of healthcare and wellness are looking to scale services outside of institutions! (e.g. Intel is developing robots to provide seniors with independent living; video)
- Financial Services - The finance sector is already gearing up with new products and services that aim to provide Boomers with steady income streams from their assets.
- Experience Sectors – For the past thirty years the US consumer has been moving steadily towards consuming services and ‘experiences’ (e.g. travel/tourism, ‘third place’ cafes and bookstores, et al). This trend will likely continue to expand especially in areas related to personal development via learning and wellness.
- Workforce Strategies - Retirement is of course based on an arbitrary age, and there is no doubt that many Boomers will continue to work out of financial need or personal fulfillment. What is uncertain is how they will continue working. Will it be part-time or full-time within their current organizations? Or will many transition careers and fields (e.g. social entrepreneurship)? I suspect the market for continual lifelong learning and skills development for Boomers could mushroom in the next twenty years!
Resources
- Aging puts wrinkle in US Marketplace – Neilsen article
- McKinsey 50/50 report
- US Census Bureau Fact Finder on Aging
- US Dept of Health report on global aging 2008 [PDF]
- Report on Consumer Spending Patterns 1959-2000 [PDF]
- Deloitte: Wealth with Wisdom:Serving the Aging Consumer [PDF] Blog post
- McKinsey report: Talkin about my generation: Impact of Aging
- Seeking Alpha blog post on Generational Shifts and Consumer Spending
- UT Austin ‘Policy Choices‘ report
- Harvard report: Reinventing Aging
- Congressional Budget Office Report on Asset
- Humor – The Onion – US Product Diversity now Exceeds Biodiversity (!!)
- Humor – The Onion – Shattered Nation Longs to Care about Stupid Bullshit Again (post 9/11)
