If you're over 40, you're going to be feeling out of place in most stores soon -- and not just in the clothing stores. There's a generational shift going on in retail, and many merchants will stop focusing on Baby Boomers as we emerge from the recession.
After analyzing recent shopper data, the consulting group Retail Forward concluded the Boomers' spending spree is over, thanks in no small part by the stock market swan dive last year. And in a briefing to retailers, it warned that the younger generations will be a tougher nut to crack.
By contrast, members of Generation X -- the 29- to 45-year-old adults -- are still shopping, but they are fewer in number and less affluent than the Boomers, and will probably stay that way a while. The even younger Generation Y, ages 10 to 28, is a larger group, but it's even harder to market to, thanks to all the media it has grown up with.
Boomers drove the last three decades of retail growth, and their spending led the way out of the last two recessions. During the last recessions of the early 1990's and in the post dot-com bust years, they were in their peak earning years.
Things are different this time. Boomers still make up 42 percent of retail spending, but this recession has hit them hard at the worst time of their lives, says Lois Huff, senior VP of Retail Forward. Many have had to postpone retirement and cut back their budgets after their nest eggs lost nearly half their value in the stock market's slump. Even with the recent market recovery, they haven't gained back even half of what they lost and are not likely to recoup that dramatic loss in wealth soon.
Polls show that Boomers have cut back their household budgets more than any other age group, and they remain more pessimistic about the economic recovery. Huff cited surveys showing that 48 percent of Boomers have cut back their spending in this recession, compared to 41 percent of senior citizens and 42 percent of Gen Y.
"The engine of Boomers that's driving retail is running out of gas, and we don't anticipate a refill," Huff says. "They have taken a smackdown that has taken them out of the market."
That means department stores and luxury merchants will lag behind the rest of retail in coming out of this recession, says Frank Badillo, Retail Forward's senior economist, as Boomers make up the bulk of luxury shoppers and department store customers.
Badillo warns that there will be more shakeups among department stores, where a number of regional players, such as Marshall Field's and Filene's, have disappeared in recent years. He expects more players will bow out as the demographic changes continue. "It's been an ongoing shift for 20 years, " he says.
On the bright side, the Retail Forward analysts note that Gen Xers are still shopping because they're at the age of raising children and setting up households. But they're both fewer in number than either the Boomers or Gen Y, and their prospects are limited. Gen Xers' earning power is being held back by both the economy and the sheer number of Boomers who now can't afford to retire and will be holding up their promotion through the workforce ranks.
Generation Y is also entering the household-forming years, and now makes up 26 percent of U.S. adults and rising, which makes it a tempting target. Members of this group may have less to spend -- they make even less than Gen Xers -- but their spending is up for grabs, because it's almost all discretionary, Huff says: "For the most part, income earned is income spent."
On the downside, their attention is so fragmented from so many media that they're hard for retailers to reach, especially department stores, according to the Retail Forward analysts. But many merchants are beginning to get a handle on how to use social networking and mobile applications to draw them in, such as J.C. Penney Co., which recently announced it would distribute discount coupons by cellphones.
Shoppers -- especially the younger ones -- now engage in what could be described as "ADD shopping," where it's not a separate activity, but an aside in a busy day, says Dan Stanek, executive VP at Retail Forward. "Now it's not an hour where they're browsing the mall -- it's a five minute chunk," he says.
Retailers turn away from baby boomers, focus on younger customers