2009Aug4 A Leaner Boomer Economy
2009Aug4 A Leaner Boomer Economy
A Leaner Boomer Economy
“Everyone from Mercedes to Nordstrom to designer Vera Wang is scrambling to remake themselves for the Incredible Shrinking Boomer Economy.”
Retailers are scared, and for good reason. The gravy train that has made their shareholders very wealthy over the past three decades – the enormous and wealthy Baby Boomer generation – finally appears to be running out of steam.
We knew this day would come; HS Dent research has long predicted that the Baby Boomers would shift from being big spenders to big savers, just as past generations have done. With the kids grown up and out of the house and with retirement looming, most Americans spend the decade of their 50s aggressively saving for their golden years. Every dollar saved is a dollar that is not spent, and given the size of the Boomer generation, that adds up to a lot of dollars.
How many, exactly? The consulting firm McKinsey estimates that a rising savings rate among Boomers will take out $400 billion in consumer spending every year for the foreseeable future. Slicing the numbers a different way, McKinsey estimates that the boomers accounted for 47% of the county’s total consumer spending before the 2007-2008 meltdown, and they were responsible for 78% of the growth in spending from 1995 to 2005. Quite frankly, the Baby Boomers are the proverbial 800 pound gorilla. Their absence from the shopping malls will be felt for years to come.
All is not doom and gloom, however. Retailers, such as those listed in the quote above, will go through several lean years of sales growth. Margins will be tighter than in years past. Some weaker competitors will no doubt go out of business. But, in today’s troubles lie the hope for the future. Those children of the Baby Boomers who are currently leaving the nest – the Echo Boomers – will eventually pull us out of this. Today, most of them are struggling to survive a truly horrid job market. Their incomes, for the most part, are low. They may spend a pretty penny on an expensive new iPhone or on other frivolities, but their overall spending power is limited…for now.
The 25-year-old, entry-level office worker may be at the bottom of the economic totem pole today, but give him or her time. In another 5-10 years, they will be married, and will probably have a kid or two. They will be at a better stage of their career, and their incomes will be higher. Eventually, they will be able to spend at the same level their parents once did. And the American economy will come back to life.
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PPS.
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