Demographic and cultural headwinds are challenging an industry already struggling to keep up with the pace of technological change.
One of the top concerns among retail executives I’ve spoken with recently is how to deal with the growing problem of traditional customer bases aging out. “We need to figure out how to attract younger shoppers,” they say. As we noted here recently, figuring out how to do that is becoming an overwhelming and increasingly complex assignment, as fast-moving technology and trends like social media make marketing ever more granular.
Some basic statistics tell part of the story.
In 2000, US Census Bureau data showed that a large portion of the US adult population was under 50 years of age, with the biggest cohort between 30 and 44—prime time for spending on home purchases, nesting expenses, and child-rearing.
School districts in fast-growing communities, like those in suburban Philadelphia, were compelled to build extra facilities to accommodate the growth. In 2004, the Central Bucks district spent $84 million to erect a third high school for 2,000 students in a system with total enrollment of 20,000, the third largest in the state.
Two decades later, in 2020, the Census Bureau reported that the bulge in the US population pyramid had shifted to those between 55 and 70 years old, a market more focused on retirement and travel. According to a Pew Research report, the US experienced the slowest percentage growth in households in at least 160 years during the 2010s. By 2020, enrollment in Central Bucks schools had shrunk by about 15%, and the administration announced plans to close some of its elementary schools.
The US birth rate has been in decline since 1950 (down 50% as of 2020), and Census Bureau data show the marriage rate is less than half what it was in 1970. As more couples decide to have fewer children, or none at all, a consumer subset emerged in the 1980s, dubbed with the snarky tag DINKs—Double Income No Kids. Today, the DINK phenomenon is alive and well, along with SINKs (Single Income No Kids), DINKWADs (Double Income No Kids With a Dog), and DINKYs (Double Income No Kids Yet).
Meanwhile, the nation’s consumer net worth is concentrated among baby boomers and Gen X, cohorts without much growth potential, and they are spending an increasing share of their money on elder care.
Spending by younger consumers has been crippled by the pandemic, student debt, and the high cost of housing (although some of these subgroups have had more disposable income after moving back home during the pandemic).
So, is chasing younger consumers the fix that retailers need?
It may be part of the solution, but it’s worth remembering that younger customers tend to be fickle. They seek out products and experiences that are new, different from their parents’ favorite brands. Younger consumers want to be surprised, to feel they have found things that are fresh, unique, and that appeal to their peers.
Finally, today’s young consumer is super tech-savvy.
We frequently hear about twenty-somethings who have mastered the social media sphere with pop-up digital stores that generate enormous sales in a matter of days, or even hours, rivaling the sales of their brick-and-mortar counterparts.
How will traditional retailers compete when the industry continues to demonstrate technical clumsiness with basic services like self-checkout, while going up against whiz kids hawking merchandise on TikTok?
In the long run, whether companies fail or prevail will hinge on some timeless strategies, chief among them talking with and listening to customers. Marshall Field said it many years ago in the 1900s: “Right or wrong, the customer is always right” and “Give the lady what she wants.” It seems obvious that all you have to do is listen to them.
Otherwise, success or failure will be dictated by uncontrollable demographics and cultural trends—a flawed approach that has killed off more than a few iconic brands (remember Toys R Us, Bed Bath & Beyond, and many others).