Hey advertisers! Take a break from fixating on Millennials and check this out: Baby Boomers and their elders are making up an outsize share of consumer spending.
The trend has significant implications not only for the biggest brands that are missing out on a lucrative audience but for an economy that continues to trudge along at a modest pace. It’s helping fuel a shift in household spending from retail goods to services, spurring more job growth but weaker worker output. And it’s contributing to the woes of retailers, such as Macy’s and Sears, that are closing hundreds of stores. The Commerce Department said Friday that retail sales unexpectedly fell in June.
“The 50-plus and 60-plus population is clearly playing a large role in consumer spending and older consumers are going to become more significant as these trends intensify,” says Wayne Best, chief economist of Visa.
In the first quarter, Americans 55 and older accounted for 41.6% of consumer spending, up from 41.2% late last year and 33.5% in early 2007, according to government and Moody’s data. Toss in 53- and 54-year-olds, and the Boomer- and-older set comprise about half of all consumption, according to Visa and Moody’s Analytics. In other words, they’re spending somewhat less than they did when they were younger but more than their predecessors.
Advertisers, meanwhile, focus their campaigns almost exclusively on Millennials, says Marshal Cohen, chief industry analyst for the NPD Group, a consulting firm on consumer behavior and retail. “The fastest-growing segment is the Boomer consumer,” Cohen says.”And they have a higher level of discretionary spending power.” Marketers “still tend to put all their eggs in one basket.”
The big brands, he says, assume their Millennial-targeted ads will also move Boomers who aspire toward perennial youthfulness. But he says that misses the mark because older adults have different needs. Instead, he says, the companies should tailor separate campaigns to different age groups.
Boomers also have distinctive spending patterns. They’re buying fewer cars, shirts and TVs and shelling out more for services such as healthcare, travel and entertainment. Apparel purchases accounted for 2.7% of all spending for consumers age 55 to 64 in 2015, down from 3.6% for that age bracket in 2005 and 5.6% in 1995, Moody’s and Labor data show. Meanwhile, 8.7% of their outlays went to health care, up from 5.9% in 1997 and 5.7% was devoted to entertainment, up from 4.8%.
And consumers age 50-plus accounted for 57% of credit spending at hotels last year, according to Visa. Household spending overall makes up about 70% of economic activity.
SOURCE: Paul Davidson