“The Baby Boomers are coming.” That was the clarion call sounded some years ago by retailers and marketers alike in anticipation of that large demographic entering the consumer economy. Well, now the Baby Boomers are “going,” to be replaced by a much smaller demographic group, the GenExers, a development that holds implications for every product and service provider.
The implications are serious. So serious that Pam Danziger, president of Unity Marketing and author of, among other titles, Why People Buy Things They Don’t Need: Understanding and Predicting Consumer Behavior, warns that the U.S. economy, as a whole, is facing a crisis: not enough customers with enough spending power to “keep all the brands, the retailers, and the marketers going, not to mention growing.”
In reporting on Unity Marketing’s most recent survey of affluent-consumer confidence, Danziger explains that consumers reach their peak earning years between ages 35 and 54, which, understandably, are the years they spend the most. The problem she sees is that Boomers, born 1946-1964 — i.e., currently between 51 and 69 years old — are rapidly aging out of that range. The following generation, known as GenX — 36 to 50 years old — is roughly half the size of the Boomer generation. As a result, she says, they will not, indeed they cannot, “pump enough dollars into the consumer economy, including the luxury market, to make up for the loss of the Boomers’ spending power.”
Danziger cites the economist Harry Dent, who posits that consumers, on average, enter a “high plateau” of spending at 39, hit peak spending at age 46, and then see their spending decline sharply after they turn 53. According to Dent, the Boomers who, as a group, are the economy’s largest consumers, first reached that plateau in 2000, and saw it come to an end in 2014. Dent foresees Boomer spending declining more dramatically in the years ahead. “Nothing will entice them to spend what they did in that 39 to 53 plateau. Nothing!” he says.
Moreover, Danziger reports that the most recent study pegs the Luxury Consumption Index at a mere nine points above its lowest mark during the recession in the fourth quarter of 2008. This, she says, is indicative of affluent consumers having grown accustomed to a “new normal” where luxury is only an occasional indulgence. Granted, the average car wash’s customer base consists of a very small portion of “affluent” consumers, and a car wash might be a discretionary expense, but it is hardly a luxury purchase. However, the behavior of those in the top income brackets affects more than just the luxury item or service they now eschew. It affects the factory worker who once actually manufactured that item; it affects the lunch counter where he used to purchase a meal; it affects the supplier that provisioned the lunch counter, etc., — another iteration of the trickle-down theory — further impeding spending and growth.
It might serve us well to heed Danziger’s warning that we are on the threshold of an extended, trying period of reduced consumer demand and spending. Marketers, she advises, will need to get their “best game on” during the following 10 years, after which the Millennials, a demographic group about as big as the Boomers, start entering their own “high plateau” of spending.