Report: Gen Y Will Spend Us Into Recovery

gen y

Don't look to Baby Boomers to lead the way in consumer spending in the months ahead. A new report from PricewaterhouseCoopers LLP and Retail Forward, owned by Kantar Retail, says that this recovery -- unlike those in last few decades -- will be shaped by the values of tech-loving Gen Y, and to a lesser degree, affluent members of Gen X.

"Boomers have lost the most in terms of retirement and savings, and they have very different spending parameters today," Lisa Feigen Dugal, PricewaterhouseCoopers U.S. retail and consumer practice leader, tells Marketing Daily. "Gen Y, and to a degree, Gen X, have disposable income in a way Boomers don't. And they spend very differently. They are still trading down, but are using many different ways to seek out bargains."

Called "The New Consumer Behavior Paradigm: Permanent or Fleeting?," the report also finds that while the frantic frugalism of the early recession has faded away, it has been replaced by "practical consumerism," a more pervasive series of behavioral changes. Shoppers are habitually much more methodical in the ways they save -- using coupons, mobile apps, comparison-shopping sites, and rewards programs. "Retailers need to adapt their strategies to appeal to this new generation of consumers," she says.



Among all age groups, while there is evidence of "frugal fatigue," the report says one-fifth of consumers continue to say no to items that seem too expensive, a third will only buy things they truly need and about one-fourth buy fewer things and shop less often. There's increasing evidence that DIY products -- such as spa treatments or restaurant-style meals that can be prepared at home -- are increasingly viewed as "good enough." And consumers continue to be open to private-label brands.

But there are considerable generational differences. Among Gen Y consumers, between 18 and 27 for this report, just 25% say the economy has significantly changed their shopping behavior. Among Gen X, it's 36%, and among Boomers, 37%.

That puts marketers in uncharted territory, she says. "In the early 1990s, the Baby Boomers were at a life stage characterized by high spending, and their appetite for material goods seemed insatiable. During the bust at the start of this decade, many Baby Boomers were in prime earning years and able to resume pre-recession spending behaviors relatively quickly after that less severe downturn," the report says.

Now, the median household wealth of Boomer households has shriveled, falling from $315,000 in 2004 to $160,000 in 2009 among 55- to-64-year-olds, and from $172,000 to $94,000 among 45- to-54-year-olds. "Without the Boomers leading us out," she says, "we don't have history to rely on. So now marketers are going to have to look to Gen Y and Gen X, groups that are smaller and behave differently."

2 comments about "Report: Gen Y Will Spend Us Into Recovery ".
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  1. Brent Bouchez from Five0, March 9, 2010 at 12:41 p.m.

    Sadly, this "study" is actually just an opinion supported by no quantitative data whatsoever.

    And, it's not only misleading, it's wrong.

    While boomer spending may have slowed during the last two years, it's all relative. The fact remains that over 50% of all consumer spending in America is and will be done by people over age 50 while they represent only 30% of the population.

    So before you put all of your eggs in the youth basket, you might take a look at the numbers and do a bit of math. You'll find that today's economy, whether up or down, is driven by people over 50. 90+ million people with full wallets and low-balance credit cards is a lot of consumers to ignore.

    The 50+ cohort controls 75% of the wealth in this country, earns $2.4 trillion annually compared to $1 trillion for the 18-34 group and they stand to inherit between $14 and $20 trillion over the next 20 years. On the other hand, only 46% of 16 to 24 year-olds are employed today--the highest rate since 1948.

    Nationally, 13% of parents say they have an adult child who has moved home due to the economy, the highest rate of unemployment is the 29 and under group at 11% while the lowest rate is in the 45-65 group at around 5.3%. Not to mention that the highest credit card balance to income ratios are among those in their 20's and 30's as well as the highest rate of credit card defaults.

    To learn more about the 50+ consumer and their true impact on the economy...

  2. Matt Thornhill from Boomer Project, March 9, 2010 at 1:21 p.m.

    Brent makes many excellent points. One additional point is that Gen Y have been living off the Bank of Mom & Dad (Boomers) until this recession kicked in.

    That bank is closed. So take with a grain of salt any surveys where Gen Y say they'll spend less -- this time they are spending their own money.

    Boomers, at their peak earning years and the maximum disposable income levels, will indeed lead any consumer spending rebound from this recession. According to a McKinsey study, Boomer households will outnumber the younger generation's households until 2016 at the earliest.

    My favorite number to share with marketers is that according to U.S. Census projections, the 18-49 age group will only increase in size by 3% between now and 2020. The 50+ segment will grow by 22%.

    How will you grow your business in that demographic environment?

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