The Effects of Aging on the Convenience Channel

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The Effects of Aging on the Convenience Channel

By Melissa Kress, Convenience Store News - 07/22/2016

RESTON, Va. — Is the United States the next Japan?

This is a question Nik Modi, managing director and analyst at RBC Capital Markets, examined during a recent webinar hosted by the Convenience Distribution Association (CDA), the trade organization that works on behalf of U.S. convenience products distributors.   

Modi pointed out demographic similarities between the two countries. For example, in both Japan and the U.S., the top 10 percent earn more than 40 percent of the country's income.

"Demographics is the single most significant driver of any economy," Modi said.

What you see in Japan, he explained, is that as the country's consumers age, they prefer to spend more on themselves. Notably, the average household aged 70 and older spends just as much on consumer staples. They spend even more on social expenses than households aged 30 and under.

Offering a closer look at the Japanese consumer, Modi noted:

  • They think it is worth spending more money on something good.
  • They are used to an economy that is growing slowly, which highlights the importance of being selective and focused.
  • Quality of life, particularly around food and everyday staples, is important.

As is the case in Japan, consumers in the U.S. are getting older, which could mean opportunities for the U.S. convenience store industry, especially as consumers trade up to premium products.

"Consumers are spending more on themselves and they want quality," Modi advised.

Small-format, convenient retail is the name of the game in Japan. Convenience is the fastest-growing retail channel in the country. Supermarkets in Japan have been on an even keel since 1998, while department stores have been on a steady decline. In fact, he cited that the convenience sector is projected to be the only growing brick-and-mortar channel in Japan. 

Specifically, the channel registered a compound annual growth rate (CAGR) of 4.4 percent from 2009-2013 and is projected to turn in a CAGR of 1.4 percent from 2014-2018.

"The Japan analysis is to help understand where we are heading [with aging consumers]," Modi concluded.