Impact of Demographic Shifts on Retail Trends

Instructor: Mary Matthiesen-Jones

Mary has worked around the world for over 30 years in international business, advertising, and market research. She has a Master's degree in International Management and has taught University undergraduate and graduate level courses .

The United States is experiencing some major demographic shifts. Learn about the four shifts that are having a significant impact on today's retail trends.

The Changing Face of America

America is changing. From how old people are to how citizens shop, retailers need to pay attention. Four key demographic shifts are emerging that are having significant implications for retailers of all types.

Aging Population

A growing percentage of the U.S. population is getting older as people have fewer children and immigration slows. Here's a chart of past and projected figures.

Age
Cohort
1960 2014 2030 2060
<18 36% 23% 21% 20%
18-64 55% 62% 58% 56%
65+ 9% 15% 21% 24%

Meeting the needs of an aging population means more than just adding handicapped parking spots. Retailers need to recognize that older consumers spend a smaller proportion of their income on things like clothing and more on food, beverages, books, and non-health items. They also spend more per item and focus far more heavily on product quality.

As consumers age, malls become less desirable and more convenience-style stores are preferred. Store design is also important with wider aisles and fewer very high or very low shelves. Older consumers are also ready and eager to use click-and-collect services, whether ordering online for home delivery, or for picking up in-store, via a drive-thru, or curbside.

Shopping online is becoming more popular among older citizens
Shopping Online

In Japan, where 25% of the population is already over 65 and accounts for half of all consumer spending, retailers are leading the way with creating smaller stores and offering delivery services. Manufacturers are recognizing that packaging needs to be easier to read and to open. Japanese stores have even slowed down escalators and made shopping carts lighter.

Changing Household Dynamics

Today fewer than 50% of households in the U.S. consist of married couples versus nearly 80% in 1950. Women are also waiting longer to get married, and becoming increasingly significant contributors to household income. This shifts reflect changes in household dynamics, which includes household composition and roles that household members play in terms of income contribution and household responsibilities.

Disappearing are the days when women didn't work and had time to do the shopping with her husband's money. Today's working women (and single men) have their own money, but less time.

Therefore, ease of shopping convenience is desirable. This means that retailers need to embrace mobile technologies to reach customers throughout their shopping experience, and they are. Nearly a third of all retail sales involve use of mobile apps. This could include texting promotional offers, utilizing online ordering, and using mobile payment apps in-store.

Women also now looking for fewer material goods and more helpful services. Many retailers now offer services to help them become a one-stop shop for the busy woman (and of course it benefits many men too). Mariano's grocery grills the meat you choose for you, PetSmart offers pet day care and boarding, Ikea offers free child supervision for an hour and a a half while parents shop.

Online retail giant Amazon now has a grocery store in Seattle where there are no checkout lines. Customers use their phone to go through the doors, then pick up what they want. The phones automatically register them and charge their credit cards when they walk out the store again.

Growing Ethnic Diversity

Just as spending patterns and amounts spent vary by age group, they also vary by ethnic group. Ethnic diversity continues to rise in the U.S. with the Hispanic/Latino population growing faster than any other group.

Race 2000 2016
White 69% 61%
Black/AA 12% 12%
Asian 4% 6%
Hispanic/Latino 12% 18%

Along with the population growth expected among Hispanics/Latinos in the coming decades, it is estimated that before 2025 this group will account for nearly 1/5th of all retail spending. And how they spend is different from other consumers. Fresh food, footwear, and children's clothing is purchased almost one and a half times more than non-Hispanic consumers.

The other growing ethnic group, Asian Americans, is expected to be larger than the Hispanic/Latino population by 2055. And while they, like the Hispanic/Latino population, have strong preferences for buying fresh foods, they are also more likely than other groups to pay extra for eco-friendly and recyclable products. Their purchase of electronics as well as their use for online shopping also outpaces the general population.

Polarization of Family Incomes

The widening income gap, called income polarization in the United States poses perhaps the greatest challenge for retailers. There is a decline of middle-income households and a growth in both high and low-income households.

See this chart on household income brackets:

Year High Middle Low
1974 17% 56% 27%
1994 20% 50% 30%
2014 22% 46% 32%

A one-size-fits-all retail model is no longer realistic because different income groups have different retail needs and expectations. How to most effectively market to the two groups is the greatest challenge.

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