Experience spending rise led by children of the 60s
Retailers should be targeting millennials’ parents, not the under-30s, if they want to make the most of the rise of spending on experiences – everything from travel to restaurants, gym classes and drinking in bars and pubs – according to a report from independent consumer consultancy ConsumerCast, 2018 UK Consumer Opportunities: The Experience Economy.
Overall annual UK spending on experiences has jumped by 34% in the past five years to £189bn or £134 per household per week, outpacing the rises in ‘stuff’ (durable and semi-durable goods) and basic living expenses, of 29% and 17% respectively. The growth has been driven chiefly by increased expenditure on travel – both package holidays and directly-booked flights and accommodation – eating and drinking outside the home, and hairdressing and other beauty treatments.
Households led by 50-64s, who include the offspring of the UK’s 1960s baby boom, are spending £65bn a year on experiences, up by £20bn or 45% between 2012 and 2017. In contrast, under-30s households spent just £14bn a year, up £2bn a year, as they shrank in number and suffered pressure on disposable incomes, mainly due to rising housing costs. Furthermore, most of their extra spend has gone on directly-booked travel outside the UK.
Retailers that have sought to cash in on this increase, including John Lewis, Debenhams, Next and Tesco, have often tried to attract a younger audience with cheaper, casual eating formats, and beauty and fitness experiences aimed at young family or millennial customers. The report argues that this strategy is likely to fail due to younger customers’ lack of spending power. Instead, they should be finding partner operators and formats that maximize their appeal to 50-64s, by offering better quality menus and experiences, with greater attention to comfort and service. However, this does not mean experiences should be humdrum and boring. “This is the ‘Madonna generation’ that came of age during the late 1970s and 1980s and it is still intent on having as much fun now as it did when it was younger,” said ConsumerCast director, Robert Carruthers.
These ‘late boomer’ households are mostly owner-occupiers, who have either paid off their mortgages or are close to doing so, having benefited from buying when house prices were low and a decade of low interest rates. They have also avoided the hit to employment income from low wage growth seen by younger households.
By 2021, 50-64s are forecast to be spending 25% more on experiences, up £16bn a year, with spend growth ahead of other age groups as their numbers increase due to the 1960s baby boom and their disposable incomes avoid the hit from higher interest rates seen by the 30-49s.
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Robert Carruthers, ConsumerCast founder/director, can be contacted for further information or comment on 07980 860301 or robertc@consumer-cast.com