Marketers ignore over 65s, the only age group who have money and want to spend

ROBERT GOTTLIEBSEN
November 14, 2017
The Australian

There is growing evidence that one of the reasons why retail spending is so weak is that marketers are missing the only age group in the community where people have money and want to spend — the over 65s.
Moreover significant segments of this group are the beneficiaries of special government incentives that induce them to spend.
One of Australia’s top retail analysts, Charlie Nelson of Foreseechange has pinpointed this weakness in the marketing of many Australian companies. Ånd when you move around many advertising agencies and marketing departments they are often populated by a large number of young people and their marketing campaigns and products are naturally usually aimed at their traditional market — young to middle aged people. Very few marketers, except the cruise lines, aim for the over 65s — they are not on the radar.
Some of you may remember that back in 2016 Charlie Nelson used his unique data collection methods to go against almost all retail analysts and forecast that the Australian retail sector must prepare for more blows because the 2016 June quarter downturn in consumer spending signalled the start of a long-term trend.
Nelson was right and now points out that household consumption spending growth remains weak and, as a result, retail sales growth continues to weaken. This has been largely caused by slowing household income growth. Real wages growth is the lowest in at least half a century.
As this remarkable graph shows real per capita income growth is actually in recession. This graph is alarming and explains why those marketing to consumers have to be on top of their game.
Household consumption expenditure constitutes 55 per cent of the expenditure measure of GDP. Without good growth in household consumption expenditure, Australia’s economic growth will continue to be weaker than the 3 per cent plus forecasts put out by many official and private economic forecasters.
You may remember that the proportion of household disposable income which goes to paying interest was falling from late 2011 until June 2015, boosting spending power for households with a mortgage. Foreseechange says that trend has come to a halt, as interest rates have bottomed, and may now go into reverse due to rising debt and, potentially, rising interest rates
To make matters worse for discretionary spending power, both electricity and automotive fuel prices are significantly higher than a year ago and eastern states governments have policies that are pushing prices higher
Foreseechange has now combined its unique tracking surveys conducted since 2003 with the recently released Household Expenditure Survey conducted by the Australian Bureau of Statistics.
Consumers are asked how a discretionary $1000 would be allocated between saving, spending, and loan repayment.
The Foreseechange survey reveals that young adults aged 18 to 29 attach a very high priority to saving followed by loan repayment and a low priority to spending. Their willingness to spend is currently below the long-term average. Those young adults who are living in the parental home have a very high determination to build savings and have the lowest willingness to spend. (The nests may eventually empty)
For some time people aged 30 to 44 had loan repayment as their highest priority although in the September 2017 survey, building savings suddenly became the highest priority. Willingness to spend is slightly lower than the long-term average. These two groups are where most marketing dollars are directed. It’s no wonder it is not working. Even people aged 45 to 64 now have loan repayment as a key objective. But then we enter “retail heaven”. People aged over 65 have spending as their top priority, after a long period of building savings. Their willingness to spend is the highest ever recorded.
Over 65s is not an age group targeted by consumer marketers and this may help to explain why so many retailers are struggling for sales growth. The over 65 population is growing strongly as the leading edge of the baby boomer generation is populating this age group. Combined with very high willingness to spend, over 65s is a great growth opportunity for consumer marketers.
Forseechange says that combining ability to spend and willingness to spend yields there are four spending disposition segments:
● Frugal Spenders (broke or struggling) are unable and unwilling to spend on discretionary items;
● Frustrated Spenders are unable to spend but willing to if they had more money;
● Reluctant Spenders are able to spend but prefer to save or repay debt;
● Profligate Spenders are both able and willing to spend on discretionary items.
The Profligate Spender segment, the only segment which is both willing and able to spend, is at its lowest proportion since November 2008 when the GFC emerged. The size of the Reluctant Spender segment is at a record high. This means that a record high proportion of people who do have money left over, after meeting commitments, prefer to save of pay down debt, rather than spend.
That’s why the above 65 age group is so important. And remember that for many every dollar they spend lifts their pension by 7.8 per cent. That return applies for those who savings level is in the pension “no man’s land” where reduction in the asset base increases the pension. The government’s badly constructed means test encourages many pensioners to run down their savings
We are going to see more affluence in parts of the middle and lower age groups but it will not change the trend. For retailers looking to make money it’s the era of the oldies Now look at the windows of our big retail stores and see how many cater for this market.