Boomers, Busters and the Future of Retailing
Andrew Ramlo
The Urban Futures Institute

Just when we thought the economic skies were beginning to brighten, the demographic doomsayers are back again preaching that markets are going to collapse due to Canada’s shifting demographics.  We have heard it all before: the aging of the Post War Baby boom will see to it that the Canadian real estate market will collapse since there are fewer busters to move into boomers’ homes as they shuffle off to the seniors’ residence; the equity markets will be similarly impacted as seniors draw upon rather than build investment portfolios; the aging of the large boomer cohort will see to it that retail markets wither as both household incomes and spending fall through the later stages of the lifecycle.

On the surface it seems so logical – fertility rates that almost reached four kids per woman by the late 50’s produced Canada’s single largest generation between 1946 and 1965; a generation that represents 28% of our current population. However, if we consider the data rather than the perception, we find that the bust generation (Gen Y, or the 20-year cohort born between 1966 and 1985 – just after the boomers), actually represents 27% of the Canadian population: 9.0 million people aged 27 to 46 versus 9.3 million aged 47 to 66. This hardly calls for a flood to the exits of the retail, real estate, equity -- or any other -- market due to there being fewer busters than boomers.

Digging down into the consumer spending data shows that total household spending does, in fact, begin to decline through the older stages of the lifecycle. From a peak of more than $88,000 for households headed by someone aged 35 to 44, total household expenditures fall by 16% by the time you reach 55 to 64 (to $75,000), further to $46,000 for the 65 to 74 age group, and to only $37,000 for those 75 plus. With the boomers currently between the ages of 47 and 66, as the doomsayer logic goes, retail markets will be in for a rough ride in the coming years. 

  Adjusting for the number of people per household shows that household spending per person actually peaks later, in the 55 to 64 age group, at $34,000 per person; spending that is almost 25% greater than the $27,000 per capita for the 35 to 44 group. With the most typical person in Canada today in their late 40’s, this higher spending group will characterize the Canadian retail market for at least the next decade.  Per capita age-specific spending data therefore show a relatively rosy future for retail spending in the coming years, despite what those doomsayers might be saying.  

Further to this, while households in the 35 to 44 age group spend more in total than those in the older age groups, the older groups, having paid off their mortgages, spend less on things like housing and taxes. Average annual household spending on  current consumption peaks in the 55 to 64 age group ($17,300 per person in the household) and falls only slightly for the 65 to 74 group ($15,400), close to the per capita spending for households headed by someone aged 45 to 54 ($15,600).  So even over the longer term, the boomers aging into the older stages of the spending lifecycle should not result in a wilting of consumption spending.

Canada's retail future, along with its housing markets, labour supply, pension and health care plans, will certainly have to deal with an increasing degree of change in the coming years. By 2031 almost a quarter (23%) of Canadians will be over the age of 65 (from 15% today); the proportion of Canadians who are members of a visible minority will also almost double (from 16% in 2006 to 31% by 2031). Change will also be seen in other dimensions of Canadian society: thirty years ago, when today's 65 to 74 year olds were 35 to 44, female labour force participation rates were just above 40%, half of the 83% participation rate for women aged 35 to 44 today. This means that there will be a greater proportion of two income, dual pension, households in the future than we have ever seen. These are but some of the dimensions of change that retailers should be strategically considering, rather than the specter of market meltdowns called for by those pesky demo-doomsayers.