Demographic Disruption

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Demographic Disruption

Demographic changes under way in the U.S. are going to cause disruptive waves throughout the retail marketplace over the next eight years. In the past, we've written about America's changing ethnicity, particularly the impact of the Latino population. But, a new generation gap is also widening, and that may prove even more jarring to U.S. retailers.

Between now and 2015, the two most important factors in the retail market will be first-wave boomers and the digital generation (second-wave Gen Y and first-wave millennials, collectively anyone younger than 30 years old).

As a result, retailers in the year 2015 will have to be more locally relevant, operating a portfolio of consumer-centric store formats, selling on the Internet and through catalogs, and increasingly focused on services that appeal to the aging baby boom generation.

Those are some of the predictions made by international management consulting and market research firm TNS Retail Forward at its annual Strategic Outlook Conference called "Retailing 2015: New Frontiers," which I attended last month.

Lois Huff, senior vice president of the firm, notes that the baby boom, which has dominated retail thinking for decades, will stand on the precipice of age 70 and start turning over the keys to younger generations.

"Society will hourglass rapidly along the age spectrum, with all the growth between now and 2015 happening in the older generations (see Fig. 1)," Huff said. The aging of the baby boom and the coming of age of the digital generation will affect how retailers grow and prosper.

Retailers will need to respond with offers that are age- and attitude-appropriate for boomers, but take into account the inevitable changes in priorities that occur with maturity -- focusing on products, services and experiences that help boomers defy, deal with or enjoy age.

As a boomer myself (although many years from 70), I find it ironic that our own saying, "Don't trust anyone over 30," is coming back to haunt my generation. Now, even though I try to stay "with it" by listening to new music, staying on top of pop culture, and using relatively new technology like an iPod, I increasingly find myself saying, "I don't get it," when reading about some of the youth trends today.

Today's generation gap is not over rock 'n' roll, but instead revolves around the growing "digital divide." Huff challenged her audience of mostly boomers like me to decipher this typical text-message that might show up on a Gen Yer's cell phone:

"DQMOT, but IMNSHO F2F talk is NBD BC AIM is the best way to KIT. BYKT. GGN. BIL. HAND." (For translation, see The Scoop, page 12.)

As I scratched my head, Huff explained that with younger consumers, interconnectivity will be both a part of life and a way of life that impacts how people get and share information, communicate, transact business and socialize.

While they will have a lot less money than the baby boomer generation, Gen Yers and millennials will be more fragmented into niche interest markets, demand more personalization, and will be harder to reach with conventional media, marketing and store formats.

These changes are already impacting the retail landscape, whether it's Tesco's Fresh & Easy format of healthy food in a convenience location, Giant Eagle's multi-format (supermarket/c-store/Express hybrid) strategy (see cover story, page 26), Best Buy's Geek Squad focused on service or Target's multi-channel strategy in which customers can order online and then pick up in the store.

Tomorrow's retailer will sink or swim -- depending on how well it reacts to these two dynamic waves of consumers.