Retail Trends in the 1990s: The Aging Population Will Trigger a Host of Retailing Innovations in the Decade Ahead

By Sarkissian, Richard V. | Journal of Accountancy, December 1989 | Go to article overview

Retail Trends in the 1990s: The Aging Population Will Trigger a Host of Retailing Innovations in the Decade Ahead


Sarkissian, Richard V., Journal of Accountancy


RETAIL TRENDS IN THE 1990s

The aging population will trigger a host of retailing innovations in the decade ahead.

Retailing is fundamentally the business of buying and selling goods. A successful retailer offers the right goods at the right price in the right location. A successful retailer can't be static. The fundamental changes in demographics and consumer preferences projected for the next decade will force many retailers to rethink their

* Product policies.

* Pricing strategies.

* Channels of distribution.

* Technological support.

* Real estate needs.

This article takes a look at retailing in the next decade.

DEMOGRAPHIC CHANGES

Demographic projections indicate the population will increase 7.1% by the year 2000. But unlike previous population rises, this one will come more from increased longevity--not increasing birth rates.

Exhibit 1 on page 48 illustrates the following demographic trends:

* The 16-to-24 age group will continue to shrink as a percentage of the population. Since this group has traditionally supplied labor for retailers, this downward trend will force many retailers to either reduce their demand for labor (through increased use of technology) or be more innovative in attracting this age group to retailing. A third action will be to attract workers from other age groups. We're likely to see as many retirees staffing retail stores as teens. Additionally, retailers currently selling to teens may need to shift their product lines to counter the impact of a shrinking market.

* The 25-to-34 group also will continue to decline. This decline may be more significant than the decline in the younger group because the 25-to-34 year olds create new households and therefore purchase home furnishings, appliances, housewares and similar items.

* The population in the 35-to-44 age group has reached its peak and will continue at this level. Again, retailers catering to this segment will find it difficult to increase sales without taking market share from other retailers.

* The group between 45 to 54, clearly on the rise since the early 1980s, is projected to increase 31% from 1990 to 2000. This age group is at the peak of its earning ability, while its largest expense--its mortgage--mostly is low and close to disappearing. To win loyalty from this group (and capture some of its discretionary income), retailers will have to cater to its new needs and preferences. Fueled by the aging of the baby boomers, this group will continue to grow and spend in the 1990s.

* The 55-to-64 age group also will rise from the mid-1990s as the immediately younger group gets older. In addition, the increased longevity due to medical advances will increase the numbers in this age group. Many in this group will go into retirement, which means a necessary slowing of spending. But it also means more time available for shopping. Therefore, retailers will succeed by offering these customers merchandise for travel and for other leisure activities.

Though the population is aging, don't be fooled into thinking the United States will become a geriatric society buying Geritol and liniment. The aging baby boomers are active both at home and work, and they've been taking good care of their health. Many are better educated than previous generations, they live in dual-income families and they have many hobbies and interests.

THE CHANGING CONSUMER PREFERENCES OF THE 1990s

The 1990s not only will see more older consumers but their preferences will change. And they'll have more money. Because those in the over-50 age group have already purchased homes and reared families, their expenses tend to plateau. This group controls 50% of all discretionary income and earns 42% of all U.S. aftertax income.

As people age, their consumer preferences change. This group is much more value-oriented than younger groups; it's not looking for image products. …

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