Population aging drives changes in consumer’s behavior as important as those generated by globalization. These phenomena are currently largely overshadowed by the economic crisis which is often a « partial » explanation for declines or variations in some activities. We face a profound consumption restructuration with the population aging.
Here are 12 important impacts of population aging :
More generations
We go from 4 to 5 or 6 generations at the same time. This phenomenon has a strong impact on many sectors with evolving needs, more complex situatinand varied situations: intergenerational leisure, relationships between children and elderly parents.
Relations between generations and intergenerational financial transfers also bring important changes.
A change in the consumption structure
As we age, needs, desires and consumer relationships change. For example, a 55-year-old couple with an elderly dependent parent will have different priorities than a couple whose parents are healthy. The life stages which have an impact on consumption are many: home purchase, mariage, children birth, departures of children, unemployment periods, retirement, divorces, health problems…
Stagnation (or even decline) in overall consumption
Different European or American studies indicate a stagnation in consumption or a decline in overall consumption in aging countries for the next 25 years (apart from any change in immigration or birth rates). Many analyses on the « age and generation effects » shows a stabilization of total consumption with sectors increasing and others declining. In countries such as Germany which age very fast, consumption could drop by 2.5 to 3% by 2025 due to demographic factors.
Rising sectors: health, entertainment , home expenses, services
As we age, consumption is changing. Some expenses are rising such as, for example, health and home expenditures because people stay a longer time home. Thus, electricity consumption is expected to grow by 1.3% in 2025 due to demography. Other factors to consider include generational factors. One generation may over-consume a product. This is the case of the Boomers (50/65 years old) who, as they age, push the consumption of electronics, tourism and well-being up.
Falling sectors: equipment, transport, clothing, food
At the other end, some sectors are declining: capital goods, transport, clothing or general food. These strong trends are currently hidden by the economic crisis. For example, between 2006/2007, in Japan the « oldest » country in the world, the automotive market was structurally declining by 4% per year, due to aging. When a person is aging, he tends to buy better quality goods and to keep them longer. It increases the renewal cycles and then causes a drop in sales of some products.
An increase in renewal cycles
Some studies show significant changes in Boomers: they buy higher quality products that have a longer shelf life. Thus, renewal cycles increase. Due to this phenomenon, the car market is expected to decline by 12.5% ??by 2025 in developped countries and the household appliance sector by 8.6%, apart from any factor related to the economic crisis.
Increased savings
For example, the French savings rate increased in 2011 to 16.8%, its highest level since 1983 mainly due to the economic crisis. Beyond that, fears about the future tends to lead to savings. But these fears increase with age. Thus, the savings rate in Europe is expected to increase by 1.2% by 2025 in Europe driven by Seniors who save in inheritance anticipation and potential health problems.
Lower labor costs
Expenditures on supplies, clothing, and work-related transportation are falling in an aging population with more and more people in retirement and fewer assets. The employment rate has dropped sharply from 56% in 1975 to 51% today. With the retirement of the largest generation, productivity gains and other factors, the employment rate is expected to decline in many countries. With a decline in the number of assets, certain types of consumption will decline.
Towards a recovery of the Boomers
The « Baby boom » generation has been the focus point since the 1950s until the mid-1980s. After 15 years of forgetfulness, the Boomers have becoming very important customers: more than 35 millions in the US. A purchasing power above the average from 30 to 40% and arriving at retirement with more leisure time. Recent studies indicate that they are at the end of a cycle: more and more Boomers are becoming aware of the « futility » of some of their purchases. In other words, they begin to reduce their consumption that are exclusively related to « immediate compulsive pleasure ». Between 2008 and 2010, according to a Focalyst study, impulse purchases fell by 41% in the United States in this generation.
Towards more heterogeneity in needs and desires
Studies in sociology show that as a person gets older, this person takes decisions more according to his own needs (what is important to him) and less in relation to a fashion or others’ opinion. Thus, the individualization of demands increases and generates a necessary heterogeneity of offers. This phenomenon is further magnified by a generational factor of the 55/70 years plus that gives more importance to freedom of choice and individualism.
Towards an increase in the cost to have a customer
The heterogeneity of demand and the need to offer more individualized products and services via a greater number of distribution channels significantly increase the acquisition costs of a customer in many sectors. The figure of 30/35% is often cited by the tourism industry compared to the older Seniors.
Towards values ??of sustainability, authenticity, environment respect
The maturity of the generations and the generational factors of the 55/70 years redistribute important values. Even if the economic crisis tends to moderate this phenomenon, we are witnessing an increase in the values ??of sustainability, authenticity and respect for the environment.