Focusing on the Elderly Consumer Segment
November 30, 2016
Given Black Friday was just a few days ago, and we are now full swing into the holiday shopping season, I thought I would share my thoughts on a recent McKinsey&Company article/podcast entitled Getting to know urban elderly consumers. It should be no surprise the over-55 set is growing — they are, after all, the baby boomers. But what this article points out is that this consumer group is not well-understood, nor is it generally targeted.
Monica Toriello, an editor with McKinsey Publishing, moderated the discussion between McKinsey Global Institute Partner Jaana Remes and McKinsey Partner Markus Schmid. Toriello pointed out that in developed countries, this consumer group “Grows by more than one-third in the next 15 years…they will account for about 51 percent of urban consumption growth, which is equivalent to more than $4 trillion.” That translates to roughly $266 billion per year (globally). That is a pretty significant number. To put that number in perspective, according to StatisticTimes.com, the US GDP for 2016 will be $18,562 billion.
This means, of course, that companies need to pay attention to that number, but as Markus Schmid argues, “Growth is coming by the sheer size of the segment but not necessarily by the wealth of the segment.” He notes that in France, “the 60-plus-year-old segment will have 20 to 30 percent less disposable income, and at the same time it is growing twice to three times as fast as the segment of the 40 to 50 year-olds.”
This presents a bit of a conundrum for companies who want to appeal to this consumer market. How can a company justify making potentially costly changes to accommodate a market that, while large, has less expendable income?
Remes argues that there is no longer any type of average or dependable consumer. Both Schmid and Remes argue that companies do need to take the time to understand this consumer segment and its needs. For example, Schmid notes that this population will exhibit physical limitations over time, and packaging may be an issue. He also notes that time is different for them. Unlike a mother who is juggling children, career and home life, and is therefore always busy, the 55+ consumers have more time to do everything. Remes ultimately states that we need to forget the old stereotypes we have about older consumers, though, because they are more active and more engaged and, more than expected, they are actively taking post-retirement part-time jobs, further growing the gig economy.
While there is no definitive road map for consumer-oriented companies, it is clear they need to understand this consumer segment if they want to tap into that $4 trillion our over 55s will spend over the next 15 years.
I encourage you to listen to the podcast or read the transcript. You can access both here.
Anne Converse Willkomm
Director, Graduate Studies