David Foot, author of Boom, Bust, Echo offers advice on how to anticipate demographic changes and profit from these insights.
"Demographics are about everyone: who you are, where you've been, and where you're going. Demographics explain about two-thirds of everything: which products will be in demand, where job opportunities will occur, what school enrollments will be, when house values will rise or drop, what kinds of food people will buy and what kinds of cars they will drive," said David Foot. In his landmark book, BOOM, BUST & ECHO, David offers us the power to anticipate changes, and profit from the coming demographic shift.
He addressed an early morning bright eyed and bushy tailed audience of several hundred Home Furniture and Home Hardware dealers, keynote speaker at their fall show at Elmira, Ontario. Dry stuff? No way! Certainly David deals in statistics, but his graphed highs and lows represent people, our customers, our bottom lines, now and post-Millennium.
In the US and Canada, the population base is undergoing a major transformation, a swing from a predominantly young to a predominantly middle-aged society. Because of this, retailing has reached a brand new era of quality and service with less emphasis on price. And this is a trend that will last, Foot predicts, and which naturally extends to manufacturers who must renew their emphasis on quality if they are to maintain market share.
Foot defines the BOOM, BUST & ECHO theme. "The aging of those born between 1947 and 1965, the baby boom generation, has changed our economies, driven housing and other markets, and transformed social mores and lifestyles. As boomers enter mid-life, as the 'baby-busters' behind them come of age, and as the 'echo generation', the children of the boomers, reaches maturity, how will the country change? Where will people choose to live? What are the prospects for employment? Which investments will be favored? What lies ahead for the health care and education systems?" And what will be the furniture buying habits?
Young people usually have little money and lots of time in comparison with the middle-aged. They can check out every store in town if they want to buy a stereo. Every dollar saved is important to them. Once the purchase has been made, they take the system home and put it together. Again, it doesn't really matter how long it takes. But there are fewer people in their twenties around. "That's when they rent their homes and they're in the market for cheaper furniture. That's why this market is much smaller."
Middle-aged people have more money but less time with heavy responsibilities at home and at work. They won't spend their precious leisure hours doing comparison shopping to save $50 on speakers. They want top quality stereo systems from a store with a good reputation, and they want it with a maximum of speed and a minimum of fuss. They might even be willing to pay extra to have it delivered and assembled because, for them, the time saved is worth more than the additional cost.
Boomers are now in their late thirties to early fifties. Most have already bought furniture for their first homes and, generally speaking, it was inexpensive. Now they're ready to upgrade their homes and they'll gradually replace their first purchases with better furniture, more leather, more sumptuous upholstery, elegant solid woods or veneers. You'll find more and more customers in their late 40s. When they buy, as with stereo equipment, good delivery is essential but it must be flexible to suit their working hours. And you'd better find good quality moving technicians, too, Foot advises. "No cowboys moving good furniture around.
"The Echo kids will begin leaving home in the early years of the new Millennium. Back to the future again, with Echoes buying inexpensively and assembling themselves and this segment will increase. That's how boom, bust and echo cycles work!"
Today, the boomers are beginning to take severance packages, "just at mid-life crisis time they're starting something new", and many of these people will work from home offices, a dynamic growth market. "Their workplaces must be bright and cheerful, and some better ready to assemble furniture can be sold to these people to house their computers, faxes, and diskette/CD-ROM storage."
To prove the point, let's look back to the '60s and '70s when North America was filled with young people. At this time, anything that could lower the average cost of production and reduce the price to the consumer was important. This environment enabled the big retail mall to be born and to thrive, making it possible for stores to lower costs and pass the savings on to customers. Malls won't disappear but Foot is convinced "their glory days are over. In the 20 years to come, the demographic shift with favor a revival of neighborhood specialty stores supported by loyal customers for whom price is no longer the most important factor in making a purchase decision.
"Stores that can deliver good products and good service will dominate this new marketplace, while stores that waste customers' time and treat them rudely will disappear. Retailers that prosper will be those that succeed in adopting customer service as a way of life."
Foot believes that the '80s showed dramatically how markets can change from one decade to the next because of demographic shifts. "The baby boom echo began in 1980 with the result that the under 14 group grew by five percent over the '80s, a turnaround of 19 percent compared with the '70s. That's how toy companies on the verge of bankruptcy in the '70s became profitable in the '80s."
Remember, today's boomers don't want to take defective products back. They don't want to make three telephone calls to find out if something is in stock. They won't support retailers who waste their time. Today's customers don't want to suffer, they want value and convenience. Stores whose only attraction is cheap prices face a dismal future.
We all need forecasting tools. Crystal balls don't work too well for most of us. But demographics can steer us in the right direction. The baby boom is the largest single demographic cohort, but it is only one third of the total population. Of course, the other two thirds also have needs to fill and money to spend. "But it's always easier to succeed in a growing market than in a smaller one," asserts Foot. "In North America, the growth is always where the boom is. Because the boom has moved into its '50s, we will have more older consumers than young ones for many years to come. The age of quality and service has a long future ahead of it."
David Foot is an economist and demographer at the University of Toronto, a speaker and consultant to corporations, associations and governments on the implications of demographics for private and public policy. He holds a doctorate in economics from Harvard and is the author of numerous scholarly works and popular articles on the economic and social impact of demographic change. BOOM, BUST & ECHO was published by Macfarlane Walter & Ross, Toronto.