Retailers face a more complicated, nuanced demographic landscape than ever and they need to be able to adapt to the changes.
Across the developed world households are smaller, populations are older and societies are more ethnically and identity diverse.
The number of single parent and single person households has reached historic highs, but retailers too often rely on outmoded notions of what constitutes a ‘family’ when thinking about their customer base.
Gender roles have changed too, with brands having to recognise the increasing number of men in the aisles.
These changes are live, which means retailers asking themselves questions about how to cater for today’s groups of consumers.
The grey pound: not one segment, but many
The most disruptive demographic trend for retailers is the ageing of the population. Yet few have really come to terms with how this will impact their business, preferring to focus their energies on the attraction of younger shoppers (millennials) while lumping all over-50s into one ‘silver segment’.
This has to change and it will do, as retailers realise the size of the opportunity that awaits them.
The over-55s will account for more than half of consumer spending growth in developed markets in the next two decades, making them a high growth segment in otherwise slow growth markets.
This group, a version of the DINK category (dual income, no kids), thinks and acts differently compared with their forebears.
The over-55s will account for more than half of consumer spending growth in developed markets in the next two decades
Kevin Jenkins, Visa Europe
They have disposable income and they are used to spending it. Over-55s control almost 75% of the total wealth in the UK, most are still in work (the employment rate for people aged 50 to 64 is 67%, according to the Department for Work and Pensions) and they keep on working – by 2020 more than a third of the UK working population will be over 50.
Older shoppers have become a must-take opportunity. In the next 20 years, the number of shoppers over 65 will almost double.
Retailers have to find ways to sell to a demographic that has previously valued traits such as thrift but is now investing in a better quality of life in old age.
While shoppers might be getting older, their experience of ageing is changing in line with expectations of staying active and mobile later into life. Retailers should be aware of this when marketing to the silver segment – reminding shoppers of their age is a strategy guaranteed to fail.
UK retailers could take their lead from markets such as Japan. The country has begun to experiment with new product lines and formats to appeal to older consumers.
Aeon, Japan’s largest supermarket group, has launched a ‘Grand Generation’ strategy, for example. It aims to provide greater in-store amenities to older customers and make the shopping environment easier to navigate.
At the Funabashi shopping centre in Chiba, just outside Tokyo, older customers do their grocery shopping, visit a medical clinic, enjoy a 5% discount on pension day, join a range of hobby classes and even find a date.
Holding on to the millennials
At the other end of the scale, millennial spend patterns differ significantly. They are willing to pay a premium for greater quality and experiment passionately with new retail formats.
They are also the demographic affected most by the recent recession. Combined with higher costs for accommodation and education, millennials are moving out of home, forming relationships and starting families much later.
Living at home longer means exerting a stronger influence over household spending, while sharing new ways to shop with their parents.
Living at home longer means exerting a stronger influence over household spending, while sharing new ways to shop with their parents
Kevin Jenkins, Visa Europe
As digital natives, millennials are the early adopters of new technology while being ‘ownership averse’. Access to products is more important than ownership, fuelling the rise of sharing services for everything from music to automobiles.
They have also taken enthusiastically to new ways to shop and pay: contactless cards, mobile payment apps and now, wearables. Just as millennials have educated their parents on smartphone and app usage, so they will encourage older consumers to experiment with new payment methods and retail formats.
Millennials have changed retail already, the diverse silver segment is going to change it next.
For retailers, it’s crucial to understand how these demographic trends will impact their business, plan accordingly and capitalise effectively, in store, online and on mobile.
- Kevin Jenkins is managing director UK and Ireland at Visa Europe