Deloitte recently conducted an in-depth analysis of economic, cultural, social, and environmental trends to make predictions of what future our present will bring, in “Consumer 2020: Reading the Signs
.” Here is a snapshot of what life in the next 10 years could look like.Economic Rebalance
The first part of the 21st century was marked by economic growth. The housing market boomed, and consumer spending was strong, fueling growth abroad in the form of increased export demand from countries like Japan, China, and Germany.
Of course, we now know that our “healthy economy” activity was a lot of economic “smoke and mirrors.” Companies once thought to be untouchable have completely dissipated, global credit markets are ghost towns, many Americans are living in homes they can’t afford (some not worth the amount owed on them). Credit is scarce and the job market still lags, several years after what was thought to be the pinnacle of financial crisis.
According to “Consumer 2020,” the next decade will largely be about finding a new state of normal, in the form of rebalance.
For America and the United Kingdom, this will mean importing less and exporting more, in order to save and rebuild. Currency depreciation, already being felt, generally accompanies this route, along with an adjustment to the relative price of goods. This economic shift will in turn leave countries reliant on exporting to find alternate means to stimulate their own economies.
Success in attaining a rebalance rests as much in the hands of global governments and economic policy as it does consumers. While Americans say they are committed to saving more and building wealth in light of the economic downturn, how they go about it and how well, will largely determine the future state of the economy. Credit and lending standards will continue to be tight, indicated both by historical bank and lending practices and new regulatory standards imposed on financial institutions.
In light of limited access to credit, consumers will face a reality that they have long ignored. Spending will be based (and limited) to how much real, expendable income a person actually holds, not on what they can borrow. Additionally, changes to tax policy, health care, and energy could inevitably reduce consumer discretionary spending. Consumer Ideology and Consumption
Thanks to limits on disposable income, consumers will continue to move further away from specialty retail, seeking lower prices in the form of discounters and private-label branded products, an ideology already being seen at retailers like Walmart
(TGT), and TJ Maxx
In other emerging markets, “Consumer 2020” predicts continued rapid growth, creating a large emergence of a new middle class in countries like Brazil, Russia, India, China, Mexico, Turkey, and Vietnam. With the rise of this new class, 2020 will likely include increased participation in the labor market by females in these markets, greater demand for technology, convenience products, automobiles, and financial services. Of course, the increased demand will conversely lead to increased access to credit in these countries.
“With more than 800 million middle class consumers expected to enter the global markets by 2020,” “Consumer 2020” predicts that food prices will rise, caused in part by less land availability and rising energy costs. As a result, consumers could shift away from big box retailers like Whole Foods
(WFMI), and towards local farming resources. Likewise, consumers will become more cognizant of value, resisting the urge to buy more than they need, and being mindful of waste. In turn, this could impact the obesity epidemic.
Consumers are already more aware of the importance of sustainability, with 95% of Americans reporting that they are willing to “buy green,” according to “Consumer 2020.” But, what Americans say and do are not always aligned. That reality, combined with the lack of concern for sustainability in emerging markets and steadily rising middle-class populations in them, will create a perfect storm and critical need for global consumer awareness regarding consumption.
While solutions will rest on a combination of factors like education and awareness, companies may be tasked as change-leaders. Sustainable efforts made by companies will include products that are available only in recycled packaging, and actively educating consumers, a trend that has already begun by companies like Procter & Gamble
Consumers will continue their innate need to be socialized and part of a group, but will remain driven by instant gratification; virtual and mobile communication will deepen. Thanks to constant connectivity, consumers will continue to demand more from the companies they purchase from, becoming less loyal, more aware, and relying more and more on peer recommendations than company-released communications. Marketers will be forced to listen more, and talk less, becoming part of the conversation rather than directing it.
In emerging markets, birth rates will fall as people face more economic opportunity. With increasing demands for skilled workers in these markets, especially females, parents wait longer to bear children, and have fewer of them. Rising education costs also impact the size of families. As a result, consumers in emerging markets will have more discretionary income in 2020. But, with a lowered youth population comes less long-term consumer demand. These factors combined with a longer life-expectancy will lead to a disproportionate amount of retired workers and working class in some emerging markets in future years.
In America, 2020 will bring retirement for the older portion of baby boomers. “Consumer 2020” estimates that by 2015 US baby boomers will “own 60 percent of the nation’s wealth and account for 40 percent of spending.” Further, it forecasts that the population will be drawn to products appealing to their desire to remain “forever young,” boding well for industries involved in anti-aging, travel, leisure, and wellness for the older population.
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