Changes are afoot as the millennials enter the workforce en masse and become more affluent consumers. But how are those changes amplified by the exiting of the baby boomers?
Answering this question is especially important for businesses as these two demographic shifts occur over the next few years.
A very detailed research report called Trouble in Aisle 5 [PDF] has some answers. The report is published by Jefferies & Company, a global securities and investment group, and AlixPartners, a business consulting firm.
The boomers, that huge generation born between 1946 and 1964, have long been the dominant demographic with the most purchasing power in the marketplace. In 2010, there were 59.8 million boomers under the age of 60. By 2020, this number will decrease to 17.6 million. Age 60 is key because median income historically falls sharply at that age, down about 16 percent.
Coming on the scene: the millennials. This is the generation born between 1982 and 2001. By 2020, millennials over 25 will be 19 percent of the population, up from about 5 percent in 2010. Just like age 60 is key for boomers, 25 is key for millennials. After age 25, median income traditionally jumps 60 percent.
These two shifts in population and purchase dollars means that by 2020 the baby boomers will have an annual $10-15 billion dollar decrease in food-at-home spending, while the millennials will have an annual $50 billion dollar increase.
A huge net change is coming to the market in the form of a younger generation of shoppers.
Millennials are your growth opportunity
With that in mind, let's look at what we know about millennials.
Some things are pretty straight forward. They like more fresh products, more choices, more flavors and more variety. They place great value on natural and organic products, but they are less loyal to specific brands and specific retailers, looking to buy what they want, when they want, how they want. They shop at a variety of retail formats, including online.
Technology is a big opportunity. Some 77 percent of millennials already own a tablet computer and/or a smart phone. And 47 percent of them use these devices in grocery shopping—either to shop, to check prices, get coupons or get product information.
Other things aren't so clear. They are more focused on lowest price rather than brand loyalty, but they are willing to pay for specific attributes. Natural and organic are attributes that they favor, including products that are tastier, fresher, healthier, local, convenient, fair trade, GMO free and sustainable.
It's clear that having millennials in your aisles can be a time of great growth and opportunity.
What about the baby boomers?
The boomers, however, aren't gone yet.
They are making a gradual and graceful exit. While they are still a viable part of the marketplace, they can continue to be a valuable set of customers for retailers.
For stores that carry natural/organic and health/wellness products, the boomers will continue to be an important customer base. They will want smaller package sizes and will be more price focused, but they will be looking to maintain their health and youth as long as they can.
In order to effectively reach these two very diverse demographic groups, natural products retailers will need two messages, one for boomers and one for millennials, but in many instances, both can be strong consumers groups in your store.
How are you serving both demographics in your natural store? Share in the comments.