The young urban professionals of today — the Millennials — are very different from their 1980s ancestors. Today’s generation is said to enjoy experiences more than material things. They spend their money on doing things that create memories instead of buying things that show off their status. They grew up in an age where technology was ever present and they’re comfortable using technology to get the most out of life — be it through the sharing economy or though social media. Marketers have taken note, and have developed strategies that are experience-based and work to incorporate brands into activities to attract this new buyer.
So why is there a white-haired couple on the front of this report? When we originally had the idea for this report, we thought it was going to be about Millennials shunning material things and embracing experiences and changing the definition of consumer spending. But a funny thing happened when we checked the numbers — it’s not the Millennials who are doing most of the spending. It’s still true that they focus more on experiences, but because of college debt and a housing ladder that’s difficult to get onto, they don’t have that much money to spend.
What we found was that Baby Boomers are the ones spending the most on experiences — they not only have the money (after riding the housing market and stock market over the long term) but they also have the time to do things. They are starting to retire in greater numbers and they’re using their new-found leisure time to travel and do things with friends and family. They may not be posting it all on social media for the world to see, but they are definitely spending.
And that seems to be a consistent story across Advanced Economies — spending on things like recreation and travel is increasing and the demographic that has the most disposable income and is spending the most on experiences are the Baby Boomers. Unfortunately, this trend has an end in sight — by 2030 a large number of Boomers will move into the 75+ category, which is when people start to curtail travel due to health issues.
The trend towards experiential commerce is still strong, but the next generation, Gen X, is much smaller and may not be able to keep up the outperformance of experiential spend to overall consumer spending. But for the next few years, the effect of Baby Boomer spending will likely be seen in industries such travel, cruiselines, RVs, health & fitness, retail and media.
In emerging markets, which are benefiting from positive demographic trends, younger generations are larger and driving both innovation and spend on experiences. As a result, travel is being dominated by the younger generations.
In the pages that follow, we look at both developing and emerging markets and the consumer trends and how experiential commerce is driving spending.