OK boomer: demographic shifts mean economic opportunity14th June 2022
Major demographic shifts are poised to change the consumer landscape, principal among them, an older and healthier population. With 54 million Americans currently aged 65 or over, the growing senior demographic presents businesses with an opportunity to expand their offerings to a segment characterized by a high demand for solutions to ease aging and stable incomes.
The US is undergoing a generational shift. While boomers are retiring, they aren’t disappearing as a significant consumer group. Older Americans are expected to account for ~23% of total population in 2060 versus ~16% today. They aren’t keen on nursing homes or assisted living communities; they are active. Pickleball, the fastest growing sport in the nation, is keeping the country’s seniors engaged and healthy. Age-restricted communities peddling hedonism, like The Villages in Florida’s Sumter County, are thriving as they provide a rich social life and stimulation for a traditionally isolated demographic. Others are opting to age in place and choosing to live independently in their existing homes and communities.
Counter to this, fertility rates are dropping; the US rate is 1.7 births per woman, well below the replacement rate of 2.1 births per woman. The US population is getting older, and projections suggest it will stay older for the considerable future. This will impact businesses that have a narrower focus on younger generations.
Senior spending power
It is time to reimagine seniors as core consumers. Boomers are the wealthiest senior cohort ever in America. As career earnings continue to rise for each generation, consider the effects of unprecedented asset appreciation. Compared to previous generations whose wealth was primarily constituted by savings, it is estimated that half of boomers ~$5+ trillion in collective wealth is appreciation. The increasing democratization of capital allowed more retail investors to capture market gains beginning in the 1980s. Likewise, constraints on the housing market have pushed real estate prices up ~350% since 1987 per the Case-Shiller index. Home equity as a vehicle for increased consumption has only compounded the spending power of American seniors.
CIL has identified three market segments where seniors’ spending power is most interesting: healthcare, housing and technology. Each segment broadly effects the entire population, however the unique stressors facing older Americans have age-specific opportunities.
Seniors are inspired or constrained by the same needs and wants as their younger counterparts. Healthcare is a need that faces all, though at a higher intensity for those facing age-related illnesses. Peterson-KFF estimates that the over 65 population accounted for ~35% of national health care spend in 2019, with the 55–64 group contributing an additional ~21% of total spend. Spend is likely to increase further as seniors take advantage of home health care and concierge health services that offer a more convenient and comprehensive solution for preventive and diagnostic care.
Likewise, housing costs remain a heavy burden on most Americans. To age in place, which ~87% of older Americans are keen to do(according to AARP) the US housing stock must adapt. Data from the US Census Bureau suggests that roughly ~10% of US homes are considered “accessible”, creating an enormous opportunity for home modifications. Baby boomers are already responsible for ~50% of US home remodeling spend (JCHS: Ready for Renewal). This spend is compounded by an increasing demand for multigenerational housing, itself driving mobility-inspired housing spend by younger cohorts aiming to support their older relatives. Accessible bathroom refits, mobility-assist devices, and larger home renovations are all creating opportunities for senior-specific businesses.
And while seniors spend in many segments outside of healthcare and housing (such as, travel and leisure, education and clothing), perhaps the most overlooked segment is technology. Baby boomers are more confident using technology, with ~82% owning a smartphone and half that using mobile banking services at least once a week (Euromonitor). There is a nascent opportunity in age-specific tech. AgeTech is not constrained to the ubiquitous medical alert buttons that clog TV broadcasts; there are now apps and sensors to detect falls and to remind users when to take pills. There are blind-spot detectors for mobility scooters, and there are virtual reality opportunities to “travel” or meet people. AARP leads the AgeTech Collaborative, an incubator that links start-ups developing products for the 50+ demographic with investors and thought leaders, though there is much opportunity in tailoring existing technology to solve age-related problems around mobility and connectedness.
Some subsectors of healthcare, housing, and tech will be affected by a waning youth population. Companies targeting these cohorts may be able to maintain revenue by increasing prices; companies may see more success if they diversify to capture the waxing elderly demographic. This could be as simple as creating a new brand to target aging populations, or building an entire set of aging solutions from the ground up. Many new markets will certainly be service-driven. Companies must adapt to evolving consumption patterns, and they can get a head start by focusing on evolutions driven by demographic shifts.
If you would like to discuss how any of the points raised in this article may affect or benefit your business, please do get in touch.