Supertrend Silver Economy: Investing in the spending power of seniors
The demographic shift makes seniors the fastest growing consumer age group. Which sectors will benefit in the long term.
Seniors are the fastest-growing consumer age group in the world. The baby boomers already account for around 50%−60% of consumer spending in developed markets. They have a rising share of income compared with other demographic groups and thus increasingly high spending power, especially in the developed world. Euromonitor has projected that the spending power of consumers aged 60+ will double over ten years to reach USD 15 trillion by 2020.
Maintaining consumption levels
In Japan, despite broader stagnation, household consumption by seniors has grown gradually, even during recessionary periods, and has outpaced consumption by younger cohorts. In Europe, according to the European Commission, consumer spending of those aged 60+ grew 50% faster in the past two decades than of those under the age of 30. These data points demonstrate that consumers attempt to maintain their lifetime consumption levels by saving during periods of high income and dissaving after retirement.
Sectors exposed to consumption by seniors should display a similar underlying trend of consistent and stable growth. They include leisure and tourism (the 50+ cohort spends over EUR 100 billion per year on tourism), personal care and beauty products, smart homes (a market expected to reach EUR 56 billion by 2020), eyewear, wellness and casinos. The latter have only begun to gain traction in Asia.
The aging tidal wave has become a phenomenon in emerging markets too: By 2050, four out of five global seniors are forecast to live in emerging markets. Therefore, we believe that the emerging market angle must be represented appropriately in our "Silver economy" stock selection.
Leisure items are popular
Older people have different needs, priorities and spending patterns than younger cohorts. This can have substantial implications for manufacturers and retailers. What differentiates today's seniors from earlier senior cohorts is that today's elderly are increasingly reaching their retirement age in good health, with a considerable number of active years ahead of them. It is thus not surprising that this consumer group uses their above-average spending power on leisure items, be it material goods such as fitness and outdoor gear, mobile homes and even boats and yachts, or experiences such as excursions, premium travel or spending time at gaming resorts and casinos. Notably, cruise lines today report that about two-thirds of demand is coming from elderly people, while casino companies in the USA say that over half of their revenues stems from seniors.
It is thus not surprising that this consumer group uses their above-average spending power on leisure items, be it material goods such as fitness and outdoor gear, mobile homes and even boats and yachts, or experiences such as excursions, premium travel or spending time at gaming resorts and casinos. Notably, cruise lines today report that about two-thirds of demand is coming from elderly people, while casino companies in the USA say that over half of their revenues stems from seniors.
Personal health as well as appearance are other central topics for today's senior citizens. The aim to age gracefully will likely drive higher spending on personal care and beauty products. In the UK, for instance, women over 60 already account for a quarter of all sales in the beauty category − a number that has more than doubled from a decade ago. Spending intentions are most positive in the skincare category, focused on products with anti-aging labels.
