AUGUST 25, 2016 The Silvers Series IV: Retail Reconfiguration for Seniors • This is the fourth report in our series on consumers aged 65 and older and their impact on economies, industries and companies worldwide. • The value of seniors to retailers is mixed. In the US, households consisting of those ages 65–74 direct a substantially greater share of their total spending to retail categories than the average household does, but 75-and-older households direct a lower share than average toward retail. • Among major retail categories, spending by US seniors overindexes most in books and underindexes most in apparel relative to the average household. • Many seniors want simple changes in stores, such as alterations to the layout, and many prefer shopping in smaller stores that are closer to their home. • As the older population grows, neighborhood stores are likely to become more commonplace, with major grocery, drugstore and dollar store chains catering to older shoppers via smaller stores that are close to residential areas. • Trucks delivering e-commerce orders will become an increasingly common sight in senior-heavy neighborhoods, too, as more retirees look to the convenience of home delivery in order to overcome the mobility barrier when shopping. DEBORAH WEINSWIG Managing Director, Fung Global Retail & Technology [email protected]US: 646.839.7017 HK: 852.6119.1779 CHN: 86.186.1420.3016
for Seniors • Thisisthefourthreportinourseriesonconsumersaged65andolderand their impactoneconomies, industriesandcompaniesworldwide.
• The value of seniors to retailers is mixed. In the US,households consisting of those ages 65–74 direct asubstantially greater share of their total spending toretail categories than the average household does, but75-and-older households direct a lower share thanaveragetowardretail.
• Amongmajor retail categories, spending by US seniorsoverindexes most in books and underindexes most inapparelrelativetotheaveragehousehold.
• Many seniors want simple changes in stores, such asalterations to the layout, andmany prefer shopping insmallerstoresthatareclosertotheirhome.
• Astheolderpopulationgrows,neighborhoodstoresarelikely to become more commonplace, with majorgrocery, drugstore and dollar store chains catering toolder shoppers via smaller stores that are close toresidentialareas.
• Trucks delivering e-commerce orders will become anincreasingly common sight in senior-heavyneighborhoods, too, as more retirees look to theconvenienceofhomedeliveryinordertoovercomethemobilitybarrierwhenshopping.
D E B O R A H W E I N S W I G M a n a g i n g D i r e c t o r ,
F u n g G l o b a l R e t a i l & T e c h n o l o g y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m
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The growth of the senior population will drive change in retail acrosscountries in the coming years. In the US, households consisting of thoseages 65–74 direct a substantially greater share of their total spending toretail categories than the average household does, but householdsconsisting of those ages 75 and older direct a lower share than averagetowardretail.
Among broad retail categories, spending by senior households in the USunderindexesmostseverelyinapparelandfootwear,wheresilverstypicallyspend just62%of theaveragehouseholdonthecategory.Theonlybroadretail categories in which US senior household spending overindexes arehouseholdsupplies(suchascleaningproducts)andreading(i.e.,booksandperiodicals), a category onwhich seniors spend fully 141%of the averagehouseholdtotal.
A second retail trend we expect to see is greater use of e-commerce byseniors, because the convenience it provides through home delivery suitsthedemandsofretirees.
Asaresult,big-storeretailersmayfindvisitornumberssofteningassilversaccount for anever greater shareof national populations. In this context,the bet that some large-format retailers, such as Carrefour (in France),Tesco (in the UK) and REWE (in Germany), have made on smaller shopslookswise. IntheUS,therehasnotyetbeenaclearmovetoconveniencestoresamongmajor retailers—which suggests that there iswhite space inthemarketforformatsthatcatertoseniors.
Seniors Set to Reshape Retail “If you’regoing todesign for theelderly, ask themwhat theyneed,don’ttellthem,”BarbaraKnickerbocker-BeskindtoldtheBBClastyear.A91-year-oldwhoworksatdesignand innovation firm IDEO,Knickerbocker-Beskindadvises the firmonequipmentandproductdesign forusebypeoplewhoareelderlyorhave impairedvision.Hercommentsareareminderthat,asWestern populations age, retailersmust not neglect the unique needs ofseniorshoppers.
ThisisthefourthreportinourSilversSeries.Sofar,theserieshascoveredhealthcare technology, homecare and assisted living, and technology formobility-constrainedseniors.Now,weturntotheretailsector,toexaminehowretailerscancatertoolderconsumers,intermsofhowandwheretheysell.Ourunderlying theme is reconfiguration:how retailofferingsand theretail landscapewillbeshaped in theyearsaheadbygrowth in theseniorpopulation.
First,we outline key numbers regarding the size and projected growth oftheseniorpopulation.
SILVERS’SPENDINGPOWER
Akeyfactorintheconsiderationofsilversandtheretailsectorishowmuchthey have to spend. We have interrogated data on household spending,split by demographics, for three major economies: the US, the UK andJapan. Themessage is consistent—households headed by people aged 65andoverspendlessthantheaveragehousehold,andhouseholdsheadedbythoseaged75andolderspendmuchless.
However,amajorfactorinthisspendingshortfallisthetypicallysmallersizeof senior households. Once we adjust for the number of people perhousehold, younger silvers (those aged 65–74) overindex on spendingrelative to the average, while those aged 75 or older continue tounderindex.
Asignificantcaveatisthattheaveragenumberofpeopleperhouseholdforyounger age groups includes children, who may each be expected toaccountforlessspendingthananadult.Wehavenotadjustedforchildreninour calculations, given that there is no robust indicationof the ratioofper-capitaspendingforachildversusanadult.
So,howmuchofseniors’spendingisdirectedtowardtheretailsector?Wehave analyzed data from the US Bureau of Labor Statistics on averagehouseholdspendingintheUStodiscovertheanswertothatquestion.
The figures charted below further underline the differences in consumerbehavior between younger and older seniors: 65–74-year-old householdsdirect a substantially greater share of their total spending to retailcategories than theaveragehouseholddoes,but75-and-olderhouseholdsdirectalowersharetowardretailthantheaveragehouseholddoes.
Below, we present the spending data behind our analysis, showing thecategoriesthatweconsidertoberetailcategories.Inabsoluteterms,seniorhouseholds spend less in total and less on these retail categories overall,although this canbeexplained inpartby their smaller averagehouseholdsizes.
Senior households in theUSunderindexmost severely in the apparel andfootwear category, where they typically spend just 62% of the averagehousehold amount. The only broad retail categories in which US seniorhouseholds overindex are household supplies (such as cleaning products)and reading (i.e., books and periodicals), a category onwhich they spendfully141%oftheaveragehouseholdamount.
Many senior consumersdonot just go toa store tobuyproducts; rather,they view shopping as a social activity, according to a 2013 report on theagingpopulation’sshoppinghabitsbyconsultancyA.T.Kearney.Apartfrompreferring stores with some simple accommodations in terms of layout,some 68% of the 60–70-year-olds that the firm polled stated that theyprefershoppinginsmallershopsandinthosethatareclosertotheirhome.
• Minor adaptations to store layouts/organized layouts: One of thedifficultiesmanyseniorsfaceistryingtogetproductsoffveryhighorvery low shelves. In many instances, they find that store staff areunavailabletoassistthemwiththis.Theyalsofindlargestoreshardertonavigate.A2012RetailWeekfocusgroupwithUKshoppersaged60 and older found that many of the participants thought the
Westfield Stratford City mall was well organized, while most othermalls were deemed “too overwhelming.” In terms of groceryshopping, seniors seem to prefer smaller stores and those that areclosertotheirhome.
• Simplicity in packaging and labels: Many seniors find productpackaginghardtoopen,andthatlabelsandpricesarehardtoread,even when they are wearing glasses or contact lenses. More than52%oftheconsumersaged60–70inA.T.Kearney’s2013focusgroupsaidtheyhadfoundthatproductlabelsarehardtoread.
• More choices for younger consumers, but not enough formatureconsumers: Senior consumers feel they have limited choices,especiallywhenitcomestofashion.Manyshoppersinthisgroupfeeltheyhaveevolvedwiththetimes,butthatclothesmadeforthemarefrumpy,boringoroutdated.
• Many like to stop for coffee/hot food when shopping: On Britishretailer Debenhams’ recent analyst call, CEO Michael Sharp notedthat it ismainly older customerswhoprefer the hot foodofferingsand concessions the company provides in its stores. He also notedthat revenues fromfoodconcessionsweresubstantiallyhigher thanthosefromwomen’sclothingalone.
Most retailers have not done much to address the needs of the agingpopulation,buttherearesomethatarereachingouttothesilversegmentthroughstoredesignandbranding.
WHATRETAILERSHAVEDONE
Some retailers are addressing the mature shopper demographicappropriatelybymakingminoradjustments to their storedesign, creatingsenior-friendlyactivities,usingcelebritiesover50inpromotionalcampaignsandusingseniorsassubjectsinphotosoftheirnewcollections.Below,weprofilesomeofthecompaniesthathaveredesignedstoresinordertomakethemmorewelcomingtotheseniorpopulation.
Asda,UK
What ithasdone:A“quiethour”hasbeen introducedat theManchesterstoreofUKgroceryretailerAsdatohelpvulnerablecustomerswhomaybedisturbedbynoisesshopmorecomfortably.OnSaturdays,thestoreopensanhourearlyand,duringthathour,itoffersaquietershoppingexperience:
The company says the servicewas conceived tohelppeople “with autismand other conditions,who struggle to dealwith loud noises,” and severalelementsappeartocatertotheneedsofseniorswithhearingdifficultiesorwhootherwisefindmodernretailexperiencestobeoverwhelming.
Whyitissignificant:ThesuccessofAsda’strialhasledeightotherstoresinthe same retail park to follow suit—and we could see awareness of theretailneedsoflessablegroupsincreasefurther.Despitethegrowingagingpopulation, the retail experiencehas, in recent years, tended to pay littleattentiontotheneedsofconsumerswhostrugglewithanoverloadofnoiseorinformation.IntheUK,forinstance,in-storeradiostationsrolledoutbyretailers such as convenience-store chain Co-operative Food bombardcustomers with relentless music and chat. Perhaps we will see retailersbegin to reassess these kinds of in-store features, and tomake shoppingmoreamenabletothosewhoappreciatealessintenseexperience.
Morerecently,BritishretailerMarks&Spencerannouncedthatitisturningoff backgroundmusic in all its stores, following feedback from customersandstaff.
Lawson,7-ElevenandFamilyMart,Japan
What they have done: Lawson is one of the top five convenience storeoperators in Japan,and ithasbeena leader in transforming the sector tocatertooldershoppers.Inthemid-2000s,thecompanybegantooverhaulits stores in areas with high concentrations of silvers; it widened aisles,lowered shelves, and emphasized products and food offerings thatwouldappeal to older shoppers. More recently, Lawson added nursing-careconsultationdesksinstores,withmanagersandadvisorsavailableduringallhoursthestoresareopen.
Food has been an area that many convenience store operators havefocused on to provide customers with more senior-friendly offerings.Quality,higher-endandsafefoodlineupshavereplacedsomeofthefillingbentomealspreferredbyyoungershoppersinstoreslocatedinareaswithsignificant senior populations. 7-Eleven offers a meal delivery servicetargetedatseniorsandFamilyMartevenpurchasedamealdeliveryservicecompany,SeniorLifeCreate,in2012,inordertoprovidethesameservice.FamilyMart has also beenworkingwith pharmaciesDrugAce andHiguchiYakkyoku to develop outlets that combine elements of both conveniencestoresanddrugstores.
Whyitissignificant:ItisnocoincidencethatJapan,whichiswellaheadofmost countries in terms of the aging of its population, has a majorconvenience store sector. Convenience stores were introduced to theJapanesemarketinthe1970s,withaspecificfocusoneasingshoppingforconsumers intheir20sand30s.ButastheJapanesepopulationstartedtoage, convenience storeoperatorsbegan to recognize that theyneeded toshifttheirfocustoanolderdemographic.
Wearenowseeingothermarkets followJapan inaconvenienceboom: inFranceandtheUK,forinstance,majorretailersarepushingintotheformatas the segment outpaces the wider grocery market. There is a case forarguing thatwhere Japan leads in catering to seniors, a number of othermarketswillfollow.
What it has done: The Aeon Mall in Japan is one of the first malls tospecifically targetmaturecustomersbyofferingservicesdesignedtomeettheir needs, apart from including stores that sell groceries and otherproducts that silvers are likely to buy. Aeon prefers to call seniors the“GrandGeneration,”anditssenior-focusedofferingsinclude:
Why it is significant: AeonMall hasmade shoppingmore convenient forseniors by offering products and services that meet their specific needs,underoneroof,andbyincludingfreeadd-onservicessuchasthebuspickupanddrop-offservice.Theadditionalamenitieshelpmakeseniors’shoppingjourneymoreofasocialactivitythanachore.
• Enlarging labels and providing magnifying glasses to make labelseasiertoread.
Why it is significant: These changes may not be very apparent to mostshoppers, but are noticed and appreciated by those they are designed tohelp. Includingsuchfeatures instoresencouragesmoreseniorstoshopatthesesupermarkets.
These are a few examples of retailers whose stores and sites featureelementsthatmakeshoppingmoreconvenientfor,andappealingto,seniorconsumers.Whilestoreredesignisanimportantcomponentofinclusion,itisonlyoneaspectoftheshiftstakingplaceintheretailindustryasaresultoftheriseofseniorshoppers.
HOWTHERETAILLANDSCAPEWILLBERESHAPED
As the silver segment grows, retailers need to do more than just tweakstore designs to appeal to older consumers. In our view, demand forconvenience and a need for assistance will drive two structural changes:customerswilldomoreshoppingclosertohome,typicallyatsmallerstores,andtheywillincreasinglydemande-commercehomedelivery.
ProximityShopping
In grocery, convenience stores and local grocery stores cater well to thesmaller-basket shopping of older consumers. Since they typically havesmallerhouseholdsandsmallerappetites,olderconsumersoftenhavelessneed to travel farther to shop at large grocery superstores. The relativeaccessibility of local stores and the navigability of smaller stores furtherincreasestheirappealtoshopperswhoarelessphysicallyable.
Accordingto2014datafromNielsen,babyboomersandsilversaged68andoldermakemorevisits to small-store formats, suchasconveniencestoresand dollar stores, than younger age groups do. They also tend to visitmidsizedstores(suchasgrocerystores)morefrequently.
Nielsen’s data show that senior shoppers tend to be smaller-basketshoppers. Older age groups may make more visits to a number of thesesmaller-format stores, but they tend to spend less per trip.Nielsen foundthat convenience stores are the only store type where baby boomers’spendingperbasketexceedsthatofmillennialsandGenerationXers.
Demandforlocalconvenienceislikelytoextendbeyondthegrocerysector:we expect the growth in the silver population to boost demand forproximityshoppinginhealthandbeautycategories,aswell.Aswenotedinour case studies above, several Japanese convenience retailers haveincorporatedhealthcarecategoriesandservicesintotheirofferingsinordertocatertooldershoppers.
Theproximity trendcould filter throughtoothernonfoodsectors, suchashouseholdgoodsandapparel,too.So,wewill likelyseeariseinproximityretailing that targets silver consumers, particularly in neighborhoods thatare largely populated by seniors or that include senior housingcommunities.
Wealsoexpectseniorstobecomeamoreimportantconsumersegmentfore-commerce that is based on home delivery. Online shopping is currentlyperceived as skewing toward younger consumers, but the convenience itprovides through home delivery makes it well suited to the demands ofretirees. E-commerce has a number of things working in its favor withregardtosilvershoppers:
• Itcanhelpbridgethemobilitygap—difficultyintravelingtoastoreorwith walking in general—that could otherwise prevent olderconsumersfromshopping.
• Retireesaremuch less likelythantheworking-agepopulationtofindwaitingforadeliveryabarriertoonlineshopping.
• Many baby boomers who are retiring now or who will be in thecoming yearswill carry into retirement a familiaritywith technologyfromtheiryearsintheworkforce.
Ablossomingofsmall-storedemandandonlineshoppingislikelytocomeatthe expense of larger stores. In the grocery category, in particular, lowoverallgrowthmeansneighborhoodshopsande-commercewillcannibalizebigstores’sales.
In this context, the bet that some large-format retailers have made onsmallershopslookswise.CarrefourinFrance,TescointheUKandREWEinGermany are among the major grocery names that have pushed intoconvenience formats.Small suburbangrocerystores fromdiscountersAldiandLidl,chainsthatareexpandinginanumberofmarkets,effectivelyserveasimilarconveniencepurpose.
In the US, the move toward small convenience stores has been lessconsistent, with major chains appearing to favor moderately sizedsupermarkets.InJanuary2016,Walmartannouncedthatitwillcloseall102of its smaller Walmart Express shops. At the same time, the companycontinues to grow its supermarket-sized Walmart Neighborhood Marketformat. Inaddition,WholeFoodsMarket is launching itssmaller-sized365chain (albeit aimed at millennials), and the expanding dollar store chainslooktobetappingdemandforlocalretailinginmoderatelysizedstores.
Given that there has not yet been a clear move to convenience storesamongmajorUSretailers,thereappearstobewhitespaceintheAmericanmarketforproximitygroceryformatsthatcatertoseniors.
TAKEAWAYS:IMAGININGTHEFUTUREOFRETAIL
So, howwill all these elements combine to reconfigure retail? Inmarketswhere seniors account for a significantly more sizable share of thepopulation,weexpecttoseethefollowingintheretailsector:
• Within stores andmalls, wider aisles, larger-print signage andmoreseating areas are likely.More retailers will offer food and beverageoptions to cater to seniors’ demands for amore leisurely and socialshopping experience. Andmore productswill feature packaging andlabelingthatiseasiertoread.
• Moreneighborhood stores,withmajor grocery,drugstoreanddollarstore chains catering to older shoppers via smaller stores that areclosetoresidentialareas.
• Delivery trucks will become an increasingly common sight in senior-heavyneighborhoodsasretireeslookforassistanceinovercomingthemobilitybarrierwhenshopping.
• Majorretailersinmultiplemarketswillcontinuetoexpandtheirsmall-store,proximityformats.Thefactthattherehasnotbeensuchashiftin the US yet suggests there are future opportunities to pushconvenienceformatsthatcatertoAmericanseniors.
