Recent developments of the digital world, generational changes that are followed by the value shifts have a rapid impact on trends, demand in different sectors and the market in general. These changes through business and innovation reflect all around the globe. New innovative business ideas related to improving efficiency, digitalization, enhancement of marketing and new concepts designed towards younger consumers can be seen every day. The question is - does the focus on the market of younger consumers - millennials and Generation Z really reflect needs of the fast-growing part of the consumers, which hold the highest purchasing power or is it just purely a sign that new products and services are mainly developed for the younger part of the world’s population?
It is no secret that the population of the developed countries is rapidly aging, which can be explained by a number of interrelated factors. Right now people over the age of 60 form slightly less than 13.7% of the world's population. Even though the digital skill level of this age group is noticeably lower than the average level, in 10 years time this age group will be joined by people who currently are in an age group of 40-59, which forms up about 23% of the world's population. This group is well more advanced in the digital environment than their predecessors and have significantly higher purchasing power than the younger generations. According to statistics and multiple researches, the number of active consumers will rise from 3.9 billion in 2020 to 5.6 billion by 2030 with the highest contribution being from the age group of 45 and above.
Even though these data and the generational change might seem quite self-evident, there are a number of various factors about why the change of “Baby boomer” and “Generation X” will bring a lot of unprecedented changes and opportunities. Firstly, as previously mentioned, these generations are significantly wealthier than the other generations. At the moment, these are the two most prosperous generations, either ending or having reached the top of their professional careers. For example, in the U.S. millenials make up the majority of the active workforce but they own less than 5% of total U.S. wealth in contrast with the “Baby boomer” generation that can account for about 10 times more of the wealth. Although the situation can slightly differ from country to country, there are similar tendencies in the developed countries in regards to demographics. According to European Commission data, over the last two decades the consumer expenditures have grown 50% faster within the age group of 60 and above than in the age of under 30.
Overall, the average human life expectancy in the world has reached 73.2 years, while in some developed countries it is approaching or has already exceeded the 80-year threshold, which is not yet the maximum possible. Given the pace of technological development, including the medical industry, it is reasonable to assume that it will drive the increase of the average human lifespan. This leads to the next important assumption - that this age group that will leave the labor market in the next 10 years, will do it with reasonably better health and considerably more money to spend. This assumption is also justified by the rapidly developing longevity industry. For example, a multi-million venture capital fund, Longe VC, was established this year in Latvia with main investment focus in longevity and biotechnology.
Considering everything above mentioned, there will be a number of industries that will be able to develop mainly due to rising demand directly from these age groups, such as biotechnological medicine, longevity, tourism and recreation (wellness industry), personalized top-tier care, a variety of services related to assistance at home and a package of services and goods related to provision of the quality level of life that these people are used to. A rapid growth can also be expected for the entertainment industry on spot and on the internet specifically designed and intended for “Baby boomers” and “Generation X”. In recent years in Asia there has been a growing demand for casinos from the “silver” generation, however these people are not mainly driven by financial motives, but more by the idea of socializing and spending time in society. The need for social networking and the demand for entertainment services can also be explained by the changing people's views on life after 50 - people are willing and continue to be socially active even after they reach the age of 50.
It is clear that this will be an opportunity for different businesses and sectors whose main customers will be from these generations, but at the same time reaching these customers will establish new challenges. These generations are now considered to be digitally active and advanced, given the need to adapt due to fastly adapting work environments and changing world. Even though these people are spending less time in the digital environment than younger people, they have adequate digital skills and the greatest purchasing power. According to Harvard Business Review, currently only 5-10% of marketing budgets are devoted to reaching these generations. Several studies, publications and even books talk about people after 50 feeling as being neglected or left out by the advertisers. When people belonging to this demographic group appear in ads, they often are shown in a negative context. Around 70% of the time, people in this demographic group appear in situations like sitting alone, with a partner or with a medical specialist. The explanation to this situation is simple - mostly young people are working in the advertising industry, and it is difficult for them to understand the generation, which is relatively difficult to surprise as it has seen almost everything, starting from radio jingles, the birth of television and ending with bright colored screens and personalized ads on the Internet. Spending habits have also changed over the years and have become more diverse. It will be an inevitable challenge for the younger generations to find the right approach for selling goods and services to this generation, which has a great influence in the market and purchasing power.
The question that arises is whether the solution for better reach of the age group of over 50 would be adding someone to the marketing, product development and business strategy team of the same age in order to better understand the wishes of their peers? Shouldn't older people be attracted to product development? To answer this question - there is an ongoing tendency that there is an increasing number of second and third time start-up founders, including from this age group. Although the median age of start-up founders is currently 34 years, the average age of successful start-up founders (measured by growth in the first five years) is 45. Given the trends, the number of founders from this age group and founders that have established multiple companies could grow significantly in the next 10-15 years, because they simply understand better the needs of their peers and how to sell to their age group. Also they have more experience, more funds and they are more risk-averse than this same age group 25 years ago.
This risk appetite and more active nature of life in regards to leisure and the business world in the last decade reflects particularly among Angel investors. Although the available data vary slightly depending on in which country they have been gathered, they mainly prescribe that about 70-75% of the angel investors are within the age group of 45-70, including Latvia, where the majority are over 45 years old. If 35 years ago, when Latvia was still a part of the Soviet Union, people over 50 years old were seen as soon to end their careers and that it was time for them to start taking care of their gardens and grandchildren, then today, at this age, a second life has just started, in which new things can still be discovered, risks taken and ventures started, just in a more conscious manner. For post-Soviet countries, and especially Latvia, the so-called “silver generation” has accumulated the largest wealth, mostly by inheriting or acquiring assets due to privatization/denationalization processes, successfully launching business or by having successful careers during the last period of state independence.
When we look at the Baltic and Latvian venture and private capital market, we can see that this industry is starting to be partially dominated by the “silver generation”, which soon will be joined by more and more active people who are currently in their 50s. The main difference from the typical investor's profile is that they are willing to actively participate in the development of their investment projects. It is becoming more common to see that young and determined founders of start-ups are supported by experienced and still active investors, and such investors are expected to be even more in Latvia in the foreseeable future. In view of all the above trends, in the next 10-15 years, Latvia is expected to be a good place for the development of new and prospective start-ups that focus directly on servicing the demand of these generations as they will make their experiences and resources more available to younger developers.
Written by Renat Lokomet - Strategical partner of Venture Faculty for Forbes Baltics.
Read the original article in Latvian here: https://bit.ly/31qTcVQ