Mature consumers challenge retailers - Consumer Market Intelligence - column

Mature Consumers Challenging Retailers

A car commercial currently running on television facetiously speaks of the changing status of that group of Americans who, until very recently, were known for their conspicuous consumption.

These are the Baby Boomers, the generation that reached its maturity during one of the longest periods of peace-time prosperity the country has known. These are the men and women who have made money and have been happy to spend it on themselves. Delaying children, they indulged themselves in the bet clothes, vacations, homes, and cars.

But now, the Baby Boomers are having babies of their own. And, according to the commercial, this change in status should result in a switch from the sleek, swift sports cars of the past to a slow, stodgy family car. Unless, of course, they buy the sponsor's car, which combines style with space.

Facetious or not, the commercial raises an important issue for general merchandise retailers. The American population is aging. As of 1988, for the first time in the U.S. history, there were more 39- to 54-year-olds than 18- to 34-year olds. While the focus was on youth and their large buying power in the last decade or so, it is now on that segment of the population between the ages of 45 and 64, the Baby Boomers and their older siblings, and in some cases, their parents.

The shift to an older society will affect everything from the number of schools we need, to what we wear and watch, to the amount of medical services that we use. Today, one consumer in five is between 45 and 64. That amounts to 47 million people. Together, consumers in this age group earn more money and control more financial assets than younger consumers. More than a third earn between $25,000 and $49,000 per year, and about 9% have household incomes surpassing $75,000. Their retail spending totals $400 billion.

Charting the Change

Those responsible for meeting consumers' needs know that as people age, their interests and buying habits change. Anticipating those changes can make or break a retail company. That's why Impact Resources, in affiliation with Deloitte & Touche, surveyed consumers 45 to 64 and juxtaposed their lifestyles and shopping patterns against those of the rest of the population.

The findings in this study, called "Market Opportunities, Insights into the Buying Habits of 45- to 64-year-old Consumers," show real indications of a maturing population segment. The data reveals that as people get old they tend to spend less of their disposable income. The report shows, too, that as people age they look for better quality at moderate prices.

The report also highlights differences within the group, contrasting those consumers who are between 45 and 54 years old and those between 55 and 64. The latter group was born and raised during the Great Depression, was much smaller, and learned to be conservative and cautious in the way it spent its money. The 45-to 54-year-olds, on the other hand, arrived in time to enjoy the fruits of the post war economic expansion in America and were more cavalier in their spending. Those distinctions can be extremely important to retailers and marketers trying to garner a share of a dwindling consumer market.

Youth's Dominance Is Gone

The median age of the population has risen from 27.9 years in 1970 to 33 years in 1990, and it will rise to 36.4 years in 2000. Never again will this country see as large a percentage of people under 35 years of age as it saw in the 1980s.

By the end of the decade, there will be 61 million people between 45 and 64 living in the United States. At that time, there will be 35 million American households--one in five--headed by 45 to 64-year-old consumers. That's an increase of 30% from 1990. And four out of five of those households will be living in their own homes, as opposed to rented residences. The implications in that statistic for retailers are enormous as these consumers need to paint, repair, decorate and furnish those homes.

Consumers in this age group are far less diverse ethnically than younger consumer groups--whites comprise about 85% of these 45- to 64-year-old consumers. A third of them are college graduates.

While the 55- to 64-year-olds continue to be active consumers, their purchases shift from "goods" to "experiences" such as travel, education, and fitness. The challenge for marketers is to create experiences that incorporate or promote the use of retailers' products.

Lifestyle

Consumers in the 45- to 64-year-old age group go to the movies less than the average consumer does. They participate in outdoor activities such as fishing and exercising much less than the average consumer, but they travel considerably more. The younger element in this group, however, is more health conscious than the older, and exercises and eats health foods more than the older segment does.

Shopping Patterns

Convenience is a major concern for consumers in this 45- to 64-year-old segment. They have a high preference for department stores, possibly because of the appeal of one-stop shopping. More than 75% of the women and almost 61% of the men in this segment have a distinct preference for one department store over the others. They base their preferences on price and selection.

Convenience is seen as a concern, too, in this segment's shopping at convenience stores and via catalogs and direct mail. Almost half of all consumers in this group use these forms of shopping.

Reflecting the family status, the 45- to 54-year-olds spend more in grocery stores than the older group. Though the younger consumers use coupons as frequently as the average consumer, the older folks use coupons even more. The high interest in coupons and convenience shown by this consumer group might warrant retailer experimentation with high-tech dispensing of coupons in stores.

Only 18% have a distinct preference for where they buy children's clothing. And when they buy, the prime criterion is price. The same is true regarding where they buy toys. Though Toys |R' Us leads in the 10 largest MSAs, these consumers show no preference for a toy outlet. Purchases are dictated by price and selection. It would seem, then, that merchandise for children is a means by which retailers could win over many of these shoppers.

Almost 40% of all 45- to 64-year-old consumers have a preference for where they buy major appliances.

Banking and Credit

There is a great deal of stability in banking relationships found amoung these consumers. Two-thirds have been with the same bank for more than two years. One-half have been with the same bank for two years or more. Though they are less likely than younger consumers to use ATMs, the 45- to 64-year-olds use financial products at a higher rate than the average consumer. And they use credit cards more than the average consumer.

Follow the Action

As retailers have always "gone where the action is," they must be drawn to the 45- to 64-year-old consumer group. In sheer number of people and dollars, they are the driving force in the 1990s. To succeed in the 1990s, retailers must learn all they can about their changing needs.

Today, 45- to 64-year-olds represent . . .

47 million consumers; One in five consumers; 27 million households; 35% of total households income; $400 billion in retail spending. Source: Deloitte & Touche, Impact Resources: |Market Opportunites, Insights into the Buying Habits of 45- to 64 year-old Consumers'.

Harvey D. Braun is a national partner for retailing and chairman of TRADE, the Retail & Distribution Services Group of Deloitte & Touche, the Big Six accounting and consulting firm.

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