“Old is the new young.” Is this one of those catchy but, ultimately, meaningless advertising slogans? Far from it. The 60-plus age group is going to be the most important consumer growth market over the next 15 years, generating more than one-third of global consumption growth, according to our new report, “Urban World: The Global Consumers to Watch,” which is free and available on our website. The largest elderly consumer markets today are in developed economies where their number will grow by a third between 2015 and 2030. These consumers will generate 20% of global consumption growth over this period. In comparison, European millennials will contribute less than 2%. Companies that continue to focus their efforts on what they perceive to be the glamorous youth market risk missing out.
Most companies and marketers are well aware that the world is aging, but have they really caught up with the reality of how large a market the 60-plus age group is? In developed economies, they will account for 50% of all urban consumption growth from 2015 to 2030 — $4.4 trillion. In Western Europe and Northeast Asia (Japan and South Korea), these individuals will account for about 60%of urban consumption growth. And the elderly opportunity isn’t just for the health-care sector.
In the United States, they will contribute more than 40% of consumption growth in housing, transport, and entertainment. People over 50 bought over 60% of the new cars sold in the United States in 2010, up from less than 40% in 2001, according to one study. The elderly increasingly want to age in their own homes. A decade ago, U.S. citizens aged 55 and older accounted for less than 33% of all spending on home improvement. By 2011, this share was more than 45%.
The numbers game begs the question: are companies equipped to tap into the purchasing power of these elderly consumers? One CEO in Silicon Valley noted in a conversation with us that tech companies, which have innovated so successfully for the young, have been far less good at understanding the needs and preferences of the elderly — arguably because most people who work in technology start-ups are so young themselves.
As baby boomers age, they are likely to change what it means to be an older consumer, and companies need to understand them better, and innovate to meet their needs. One characteristic they need to factor in is that this generation of elderly is likely to be much more tech-savvy than their predecessors. The smartphone penetration rate in the United States is only about 45% for the elderly but is 80% among 35-44 year olds. As these consumers age, the over-60s of 2030 are likely to be quite comfortable with technology and using it at the same rate as younger consumers — but for what, where, and how? The race is on for consumer technology companies searching for the next service or applications, and tailoring them to the older consumer. Is it really necessary to have 50 or so small buttons on remote controls?
There is more companies need to know to get it right. Income inequality in this age group has always been highest among all age groups but is rising. In the United Kingdom, for instance, 40% of this age group has a net worth of less than £250,000 ($352,000), while nearly 25% have a net worth above £600,000 ($844,000).
While many in the 60-plus age group are wealthy, others have not saved sufficiently for retirement. In financial services, high-net-worth elderly consumers are likely to demand estate and legacy planning, while those with less wealth may need to monetize their homes by downsizing, renting out rooms, or taking out reverse mortgages. The elderly may well be the next wave of sharing-economy customers. Companies whose portfolios consist primarily of mid-tier products might have little to offer. They may have to stretch their brands upward or downward, or in both directions.
Another important driver of consumption is when key life choices and events happen — from when people choose to retire to the incidence of divorce. The age at which people retire has a huge impact on their consumption. Despite the trend of people working longer, there is still a very large number of retirees with time on their hands, and that has significant implications for certain consumption categories. Time spent on leisure and sports each day in the United States is expected to increase by 210 million hours by 2030, and the 65-plus age group will account for 195 million of those hours, the equivalent of 24 million full-time jobs. How will they choose to spend their time? Companies need to track their preferences.
No company can afford to ignore the elderly consumer but, to tap into their purchasing power will require not only an understanding of how they think and what they want to buy but also their incomes, the timing of key life events, and the cities in which they live. The companies that do will be more aligned with the demands of their biggest spenders, and, therefore, well placed for profitable growth.
Editor's note: This article originally appeared on June 14, 2016, in Engage:Boomers.