Boomers quit spending, perhaps for good? ~ Brand Mix

Thursday, January 15, 2009

Boomers quit spending, perhaps for good?

Photo: Jim Donnelly (Flickr)

Earlier this week, I predicted that the nation's resolve to stop shopping, which some see as a shift to more responsible shopping, won't last long. As soon as there is an economic recovery, it will be shop-'til-you-drop again.

Denise Lee Yohn (who has an excellent blog here) commented that she was already back to her "old drive-everywhere self" now that the price of gas has fallen from its record highs of last year. She also raised the issue of generations of consumers and that perhaps a "more socially-conscious generation that drives the trends today might be more committed to a scaled-back lifestyle than the repressed boomers who set the tone in the 80's."

That reminded that I'd seen something recently about boomer shopping behavior. I'm not sure what I read originally but this article from the Press-Telegram sums up the thought: "Baby Boomers have pumped up the global economy with their profligate ways for nearly two decades. It's been a great party. Now the music's over."

"Millions of Boomers," the article goes on to say "are realizing that 'hope I die before I get old' was just a sarcastic line in a rock and roll song, not a life plan." As Boomers hit their earnings peak right around the Millennium, the U.S. household saving rate went as low as 2 percent of income (from 10 percent during the early 1980s). Now the recession has probably provided an early wake-up call to this generation to change its ways.

Olivia Mitchell, a professor at the Wharton business school, commenting in the article says: "The Baby Boomers are going to have to work longer and eat less. And go back to what my mother was doing — saving string."


Ben Kunz said...

I've been intrigued that the mass rush to consumption of the past 10 years seemed largely centered on the home -- blowing out kitchens with granite countertops, upgrading to larger houses, adding flat-screen TVs and new electronics.

I'm certain that Americans will not quickly abandon their heavy consumption habits, but it is possible that we have pulled demand forward ... so the current slowdown is not just driven by fear. In other words, we may now have big-enough kitchens and enough flat-screen TVs. I can't really bring myself to upgrade to Blueray even if I was flush with cash, because the current DVR on the 42-inch flat-screen works pretty well already.

Americans spent so much on new cars and new homes maybe our needs are full, for every a year or two. So it will take a lot more than $500 checks from the government to make us rush to the mall again.

The real hope is the younger generation is inspired by smaller and simpler things -- efficient cars, smaller houses, less stuff. I'm curious as to your thoughts on what would motivate an entire market to move in that direction. Guilt and fear are reactive -- what positive forces will pull the future of America to want more from less?

Martin Bishop said...

I love the idea that "we have pulled demand forward" and our "needs are full." It makes a lot of sense but I wonder if there's any way to test such an idea?

As to what might make an entire market to move in the direction to want more from less, I think it would require a sustained period of new market conditions (long term higher priced gas, other shortages, a prolonged recession etc). Six months of high gas prices just wasn't enough and I think people are already sliding on that.

In a way, boomers do now face a new condition--that of being old and having less and less future income to count on. That may be what changes their spending behavior.

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