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Old age britain


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Written by Dick Stroud, during December 2012, this article appeared in the newspaper read in the City of London (CityAM).

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Old age britain

  1. 1. Old age Britain: An opportunity for firmsto profit from demographicsWednesday 12th December 2012, 12:05amDICK STROUDLONDON is booming. Figures from the 2011 census show the city has witnessedunprecedented demographic change since 2001. Over the last 10 years, its populationincreased by 11.6 per cent – from 7.3m to 8.2m in 2011. A full 10 of the 20 fastestgrowing local authorities in England and Wales are located in the capital. The population ofTower Hamlets (where Canary Wharf sits alongside vibrant Whitechapel) grew by 26.4 percent.Aside from becoming more populous and diverse (only 45 per cent of London’s populationis now white British), London – and Britain more generally – is also getting older. Thereare 905,000 people aged 65 or above in the capital. The proportion of those in thiscategory in England and Wales is the highest ever recorded. Most astonishingly, thenumber 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 willleave Britain at the mercy of demographic crisis – that there aren’t enough young peopleto 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 olderconsumers, could provide companies with rare opportunities in a difficult economicenvironment.Recent reports from Accenture, BCG and Bain all predict the primary source of increasedconsumer spending in the US and most of Europe will be driven by older shoppers. InFrance, McKinsey estimates that those aged 55 or over will account for 80 per cent of thegrowth in consumer expenditure over the next 20 years. In the US, research by Nielsenshows that two thirds of the 13m most affluent households are headed by someone overthe age of 55.And in Britain, the Institute for Fiscal Studies has reported good and bad news for olderBrits. 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 onlysuffer 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 theirpurchase of annuities or other low-risk assets) is far less exposed to economic vagariesthan that of their children or grandchildren.It is baffling why companies have proven so slow to realign their business activities tocater for this older, more prosperous market. This mystery was illustrated by researchfrom the Economist in 2011. Less than 10 per cent of executives thought their marketingto older consumers was effective, yet 65 per cent expected the proportion of revenuederived from them to increase.So how can companies improve this? A good start would be to fully grapple with the mostobvious factor common to older people. They are all ageing physically. Companies in thefood, pharmaceutical, medical, optics, and cosmetics industries are already responding tothe 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 significantmarkets 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, financeand hospitality. One company that has proven particularly adept at recognising thebroader potential is Apple. Its obsessive attention to detail – from user-friendly product
  2. 2. 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 whycompanies are not reacting to obvious trends is their uncertainty of where to begin. But asApple 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 tothe Ageing Consumer (Palgrave Macmillan).