The Baby Boomer generation remains the biggest-spending and therefore most important demographic to market to, according to leading demographer and social commentator, Bernard Salt.
In an enlightening presentation at the recent AADA National Dealer Convention, Dr Salt showed that Baby Boomers continue to have more disposable income than other generations, and are looking to spend it.
He also pointed out that as long as Australia’s trading relationship with China remains strong, Australia can expect to be a ‘rich’ country for at least another generation.
Boomers still the key
Dr Salt said Australians are living longer and retiring younger than ever before. Life expectancy is now 82, while the average retirement age is 58.
“What are you going to do – sit at home and babysit the grandkids for 24 years?” he asked.
“Baby Boomers will simply not do that. They’ll reinvent that space. They will work on. They are working on – beyond 55, beyond 60, beyond 65. They have more consumer spending now than ever before. If your mindset is that ‘we need to be selling to the twenties, the thirties and the forties, there has been a shift in the market.
“The narrative of life will shift, 55 to 75, over the next decade. And the business acumen is to come up with the product, the marketing and the messaging to actually connect into an aspirational, rising force of Baby Boomers looking to reward themselves. Downshifting, downsizing, trips here, trips there, Rhine River cruises, Alaskan cruises, trips around Australia. How can you actually build your product into that demographic?”
He said Baby Boomers have taken up 1.2 million new jobs in the past 16 years, compared with 800,000 each for Generations X and Y.
“Which is the bigger market? Which market have you been focused on? Which market should you be focused on? It’s knowledge work and it’s, in fact, the 55-plus market,” he said.
Unrivalled growth raises consumer expectations
Australia has had 25 years of sustained economic growth, the longest period without recession in more than a century. Dr Salt said this had created an environment of “outrageous consumer expectations”.
“Your ability to sell motor cars is dependent upon the prosperity of the Australian consumer. There are 24 million Australians; how rich are we, what is the assuredness that wealth and prosperity will continue? A motor car costs a lot; we need to be a prosperous people,” he said.
Ride the ‘Chinafication’ of our region
In 1990 China’s economy was one-tenth the size of the US economy. By 2000 it was one-third, and it currently rates as the world’s second-largest economy, roughly two-thirds the size of the US economy.
“The argument is that by 2025 China will be the biggest economy on the planet, and in history,” Dr Salt said.
“Which country on Earth provides food, energy, resources, commodities, space, security, lifestyle, gaming services, gambling services, education services, health services, golf course services, to the Chinese? Oh, that’d be the Australians. We will be a prosperous people for another generation.
“Yes, we do have debt – $326 billion in debt we have today that did not exist seven years ago. That equates to 20 per cent of our GDP. America’s debt is 80 per cent of GDP. The UK’s debt is 80 per cent of GDP. Rightly or wrongly, our debt can bleed out for another 20 years, underpinning this prosperity. Whether it’s right or wrong, good or bad, is not the point. If I’ve got a business, if it’s my neck on the line, if it’s my business, I want to know what confidence I can have about the future prosperity of the Australian people – not so they can buy a Mars Bar, but so they can actually take out a loan and buy a motor car.”
He shared a chart that he believed gave “an extraordinary insight into the consumer space in Australia”. It showed that 42 per cent of Sydney residents were not born in Australia, with high numbers for other Australian cities as well.
“Find me another city on the planet that compares with that. There is only one on this chart; that is Toronto, with 49 per cent, and they’re all Americans, just across the border. When you think about that: 42 per cent – Greeks, Italians, Vietnamese, Chinese, Indians, Arabic-speaking people – it is the most dynamic, changeable, consumer space on Earth. Go to New York, the great melting pot: 29 per cent; go to Paris, 22 per cent.; go to Berlin, 13 per cent; go to Tokyo, two per cent; go to Shanghai one per cent.
“The space into which you are selling product is changeable, dynamic. Different markets, different languages, different cultures. Aspirational. But you are dealing with a different customer to any other people on Earth, by this measure. You need to be responsive to these markets.”
China’s 20-biggest cities are all larger than Melbourne. Shanghai has added 10 million people in 15 years, a rate of growth never before seen in history. Beijing has grown by almost as much in the same time.
“That 15-year timeframe has taken Australia by the scruff of the neck and kicked it along, if you like, creating extraordinary prosperity,” Dr Salt said.
China is currently the number two source of new migrants to Australia, behind India, but will soon be number one. It is far and away the leading provider of international students, will soon overtake New Zealand as the greatest provider of short-term visitors, and buys $90 billion of Australian goods and services (our number one market) every year, while Australia imports $60 billion from China.
“That’s a good deal. We’re making $30 billion a year just on that trade,” Dr Salt said.
“There is no other relationship that compares. As long as this continues, we will be a rich people. That wealth will wash across metropolitan Australia and find its way into your dealerships.
“It’s about putting your product, your servicing, your marketing, your message into an ascendant demographic profile over the next decade.”
Know your demographics
Dr Salt told Dealers it was crucial they understood where people are living. Towns and cities with the greatest growth over the past decade will remain that way for the next decade, as Australians continue to choose where to live based on commuting and lifestyle needs and desires.
“If I was a young man, young woman, 28-29, putting my life on the line, putting my career on the line, taking out a mortgage to put an investment into a dealership, I want to know that that town has the wherewithal to support me not just this year-next year, but 10 years, 20 years, 30 years into the future,” he said.
Being prepared means being open to change
Two years ago automotive executives would have told you the most important driver of the industry was emerging markets. Now, from a long way back, it is connectivity and digitalisation. What it will be two years from now is impossible to predict, which reinforces the need to be flexible, adaptable and open to change.
However, Dr Salt had some harsh words to say about Australia’s lack of innovation. He compared Australia’s 10 largest businesses with the 10 largest in the United States, highlighting that half of America’s top 10 were formed in the last generation, including the top three (Apple, Google, Microsoft). In contrast, Macquarie Group (Australia’s 10th-largest company, formed in 1970) was the only one of Australia’s top 10 formed after 1924.
“We are not agile, we are not innovative, we are not entrepreneurial. A less kind interpretation, from afar, about the Australian people and the Australian consumer, is that we have enjoyed complacent prosperity for almost 100 years. We are rich despite ourselves,” he said.
“I actually think it also speaks to a cultural truth about the Australian people and the Australian consumer. When was the last time we appointed an Australian of the Year from the business community? There is an antipathy by the Australian consumer towards big business – big banks, big oil, big auto, big government, big pharma, for example. Whether it is right or wrong is not the point. The point is that it is very real in Australia.
“It brings the home the point about the need for innovation or for a cultural change across Australia. There will be no more Fords and Alcoas and Holdens and Mitsubishis coming to Australia and employing thousands of Australians on our terms. Those days are gone. We have to create our own new big businesses. What’s our track record like? There needs to a shift by the Australian people at a grass roots level, in terms of their recognition if you like, of entrepreneurship, particularly on a large scale.”
Dr Salt said that Australians like to think of ourselves as being innovative, but we’re actually reactionary to change.
“And the people who do change, the people who are responsive, whether it’s in a car dealership, or whether it’s in a pharmacy, or whether it’s in the taxi industry, they’re the ones who thrive and survive,” he said.
“It is not possible to actually predict what the auto industry and the auto dealership industry will look like in 2020 or 2025. What you can do is be open to change. You cannot predict what the Australian economy, the Australian consumer, the Australian market will look like in five or 10 years’ time. What you can control is how responsive to that (you are).”