Businesses today face the challenge of achieving and accelerating growth amid historically weak economic expansion and a rapidly changing environment. To unlock growth opportunities and proactively position themselves ahead of the competition, brands must understand what, where, and why changes are happening in the consumer space.
Embracing the trends that shape future consumer needs and preferences
The future of consumption is influenced by many different factors, with the evolution of households, demographic shifts, technology advancements, and changing values being among the most significant.
Globally, households are getting smaller as single-person households are rising at the fastest rate of all household types. This trend reflects broader social changes brought about by urbanisation, delayed marriage, and declining birth and fertility rates.
Meanwhile, the global population is ageing due to rising life expectancy and declining birth and fertility rates.
The proportion of the population aged 65+ globally will increase to 15% in 2040, up from 10% in 2023
Source: Euromonitor International from national statistics/Eurostat/UN/OECD)
However, younger generations are driving key trends such as sustainability, digital consumption, and experiential spending. They are accelerating technological advances, transforming how consumers interact and engage with products and services.
Lastly, changing consumer values are significantly influencing the future of consumption, with a growing emphasis on sustainability and ethical consumption. Consumers are also moving away from consumerism and prioritising experiences over possessions.
By staying attuned to these trends, companies can effectively innovate and adapt their strategies to meet evolving consumer needs.
Navigating diverse generational impacts
Millennials and Generation Z represent a significant force in shaping the future of consumption. These cohorts, characterised by their digital nativity and strong social consciousness, are redefining market dynamics through their behaviour, priorities, and preferences. They use social media and digital platforms ubiquitously, prioritise experiences over material possessions, and value social responsibility, sustainability, corporate transparency and authenticity. The values and behaviours of these younger consumers influence a wide range of industries, from fashion and food to technology and entertainment, compelling companies to innovate and adapt.
Meanwhile, the older Generation X and baby boomers also have a role to play in shaping the future of consumption, albeit in a different way. Gen X, established in life and careers, are in their peak earning years, while baby boomers hold significant wealth and purchasing power. Baby boomers aged 60-64 enjoy the highest average income of all age groups and have a high propensity to spend as they move into retirement and shift from accumulating wealth to spending it. With substantial purchasing power and established spending habits, they are driving demand in industries such as health and wellness, travel, and luxury goods.
Combining a variety of factors to measure market potential more accurately
Identifying high-potential markets is the logical next step in leveraging the insights gained from understanding the drivers of future consumption and the key generational cohorts. It requires a holistic approach that integrates various factors.
For example, companies targeting older consumers might look at the top five markets by baby boomers’ total spending – the US, China, Japan, Germany, and the UK. Each of these markets presents different opportunities. Japan, with a large share of baby boomers in the population, presents mass market opportunities. The US, with high average spending per baby boomer household, offers opportunities for premium and lifestyle-enhancing products. China, with the second highest total spend by baby boomer households, presents opportunities for affordable products and services. By applying other metrics beyond the above-mentioned demographics, income and expenditure, businesses will uncover deeper insights that allow them to tailor strategies and unlock significant growth potential.
Key takeaways:
- Zoom in on your target segment. Understanding generational differences is key for businesses to tailor their strategies and effectively meet diverse consumer needs.
- Take a comprehensive approach to uncovering growth markets. Integrating target segment insights beyond demographics is crucial for identifying high-potential markets.
- Foster continuous innovation to stay ahead. To stay competitive, businesses must constantly monitor the market, adapt to trends, and foster continuous innovation. Market research and strategy are ongoing processes.
Learn more about the Future of Consumption in our report, Future of Consumption: A Structured Approach to Identifying Opportunities.