LONDON is booming. Figures from the 2011 census show the city has witnessed unprecedented demographic change since 2001. Over the last 10 years, its population increased by 11.6 per cent – from 7.3m to 8.2m in 2011. A full 10 of the 20 fastest growing local authorities in England and Wales are located in the capital. The population of Tower Hamlets (where Canary Wharf sits alongside vibrant Whitechapel) grew by 26.4 per cent.
Aside from becoming more populous and diverse (only 45 per cent of London’s population is now white British), London – and Britain more generally – is also getting older. There are 905,000 people aged 65 or above in the capital. The proportion of those in this category in England and Wales is the highest ever recorded. Most astonishingly, the number of people aged 90 or above has leapt up from 340,000 in 2001 to 430,000 today.
All this leaves business with a puzzle. Despite the argument that an ageing population will leave Britain at the mercy of demographic crisis – that there aren’t enough young people to fund benefits for the elderly, and that taxes must therefore rise – this is also a mega-trend that will significantly change the way business operates. Demographics isn’t destiny. But the scale of ageing, combined with the concentration of wealth in the hands of older consumers, could provide companies with rare opportunities in a difficult economic environment.
Recent reports from Accenture, BCG and Bain all predict the primary source of increased consumer spending in the US and most of Europe will be driven by older shoppers. In France, McKinsey estimates that those aged 55 or over will account for 80 per cent of the growth in consumer expenditure over the next 20 years. In the US, research by Nielsen shows that two thirds of the 13m most affluent households are headed by someone over the age of 55.
And in Britain, the Institute for Fiscal Studies has reported good and bad news for older Brits. The recession reduced the average household gross wealth of the over 50s by £60,000. But 80 per cent of those aged between 50 and the state retirement age will only suffer a 20 per cent drop in their retirement income.
This represents a sizeable group of consumers who are no longer financing mortgages, pensions or children. And, importantly, the income of these older people (through their purchase of annuities or other low-risk assets) is far less exposed to economic vagaries than that of their children or grandchildren.
It is baffling why companies have proven so slow to realign their business activities to cater for this older, more prosperous market. This mystery was illustrated by research from the Economist in 2011. Less than 10 per cent of executives thought their marketing to older consumers was effective, yet 65 per cent expected the proportion of revenue derived from them to increase.
So how can companies improve this? A good start would be to fully grapple with the most obvious factor common to older people. They are all ageing physically. Companies in the food, pharmaceutical, medical, optics, and cosmetics industries are already responding to the increase in demand created by demographic change. The global market for “anti-ageing” products is expected to grow to $300bn by 2015, and smaller but significant markets already exist for spectacles, dental cosmetics and hearing devices. These are the “age-silo” products that are used by and marketed to older people.
But the effects of physical ageing reach beyond these industries and include retail, finance and hospitality. One company that has proven particularly adept at recognising the broader potential is Apple. Its obsessive attention to detail – from user-friendly product design to packaging, support and advertising – is peculiarly attractive to older consumers, who have weaker eyesight, hearing and dexterity. According to recent polling by YouGov, Apple products are disproportionately popular among older consumers.
The changing face of society can be daunting to business. The primary reason why companies are not reacting to obvious trends is their uncertainty of where to begin. But as Apple shows, there is first mover advantage to be had. Expect to see shops, products, even banks, quickly adapting to the new realities of old age Britain.
Dick Stroud is managing director of 20plus30, a consultancy and co-author of Marketing to the Ageing Consumer (Palgrave Macmillan).