Consumer Trends In 3 Different Worlds

In the first of a two-part series, a professional futurist and businesstrend watcher looks at the big trends in demography, money, and consumerism that will shape the world in the next decade. By Andy Hines

Consumer Trends in ThreE DIFFERENT “WORLDS” 18

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July-August 2008

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hat are the top 20 trends affecting consumer life around the world? The futurists and analysts at Social Technologies have done a number of deep dives into the topic and produced a list of “durable” trends that are sure to be important over the n e x t d e c a d e a n d b e y o n d . We grouped these trends into five categories: demography, rising wealth, culture, infrastructure, and values, and we suggest business implications for each of these trends. Throughout this analysis, we refer to World 1 (or W1) World 2 (or W2), and World 3 (or W3) as our three “worlds” based on an index that rates a country’s economic and social development and technological capability, then groups them among peers. W1 consists of fewer than a billion people in the affluent countries, including the United States, western Europe, Japan, South Korea, and Australia. W3 consists of the 1 to 2 billion people who are in dire straits, including most of Africa, Bangladesh, and Haiti. The W2 world is the large segment of 3 to 4 billion in the middle, in nations that are relatively balanced in terms of needs and resources, though still vulnerable to setbacks. Some W2 nations, such as India and China, are growing particularly rapidly, while nations in other regions, such as in Latin America and eastern Europe, less so. Look to these trends to be influential, assuming relative economic stability, over the next decade. Demographic Trends Demography is a solid starting point for our trend analysis, because demographic numbers are fairly predictable. However, when we look at the future of demography, a rule of thumb is that the exception is becoming the rule. Trend 1: Aging population. We are all familiar with the notion of an aging population. Imagine the world resembled Florida or Italy, where the median age will be 50 by mid-century. The populations of the world’s most developed, W1, countries are skewing toward more older people and fewer younger people (“aging,” in other words). W2 is just a genera-

tion behind. While those in the United States might complain about the “broken” Social Security system, most of W2 and W3 don’t even have a social security system. Of course, opportunity emerges from need, and the financial services in these countries are poised for explosive growth, particularly in W1 countries. An interesting aspect of aging in nations like the United States is the increasing obsolescence of retirement. U.S. baby boomers are choosing post-work lifestyles that don’t resemble the stereotype of the quaint, restful senior citizen. Surveys reveal that about three-fourths of boomers plan to keep working beyond retirement age. Boomers are going to live longer, generally be in better health, and have a better education than previous generations. Why not work longer? A futurist who joined Social Technologies about a year ago is a poster child for the post-work boomer. She retired in 2006 after 30 years with a large multinational corporation. She works for us part time because she finds futures work interesting and is willing to accept less money than she made in the corporate world. She also teaches a class at a university near her home—where she is working on another degree for herself. She is active in her church, goes to boot camp fitness training at 5 a.m. every day, takes motorcycle trips with her boomer husband, and is currently planning to run the Rome Marathon. I jokingly tell her she is going to have to go back to work to get some rest! Business implications: In their quest to discover new activities and have new experiences, non-retiring seniors will look for ways to stay active despite diminishing physical abilities. Companies will surely want to tap their valuable expertise and experience. However, many seniors will insist on working on their own terms, setting their own working conditions or even establishing home-based freelance businesses. The urban renewal trend under way in cities like Baltimore and San Francisco—where empty-nesters leave the suburbs and good school districts to relocate to high-rise condos in downtown ­areas—is also part of this trend.

The Three Worlds W1 consists of fewer than a billion people in the affluent countries, including the United States, western Europe, Japan, South Korea, and Australia. W2 is the large segment of 3 to 4 billion in the middle, in nations that are relatively balanced in terms of needs and resources, though still vulnerable to setbacks. Some W2 nations, such as India and China, are growing particularly rapidly, while nations in other regions, such as in Latin America and eastern Europe, less so. W3 world consists of the 1 to 2 billion people who are in dire straits, including most of Africa, Bangladesh, and Haiti.

Trend 2: Changing families. It’s time to put the traditional family on the endangered species list in W1. “Alternative” family arrangements, on the fringe a generation ago, are now mainstream. Consider that 51% of adult women are now without a spouse and 37% of babies are born out of wedlock in the United States. Couples are delaying childbirth to pursue career goals and then generally having smaller families. Single-person households are the fastest-growing type of household in the United States—second only to multigeneration households, in which parents move in with their kids who still have kids of their own at home. This isn’t surprising considering the cost of raising and school-

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Trend 1: Aging population. The populations of more-affluent countries are skewing toward more older people, fewer younger people.

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ing children in many W1 countries. In March 2008, the U.S. Department of Agriculture deduced that the cost of clothing, housing, and educating a child in the United States until the age of 18 is $204,060. Kids now grow up faster and, ironically, adults are “growing up” more slowly. Children absorb adult messages from media and are moving through childhood more quickly. Meanwhile, many adults are seeking to recapture their lost childhoods— these youth-seeking grown-ups have been called “rejuveniles” or “kidults.” Those who come back to live with their parents have been dubbed “boomerangers.” An indicator of this demographic boundary blurring is the formation of adult kickball leagues and participation in other activities formerly associated with children. At the same time, adults are going back to school in record numbers—in many cases outnumbering youths in the classroom. Business implications: Given all these changes in the nature of families, organizations will need to reconsider how they think about families and how they communicate with them. These shifts are already driving market researchers crazy—at least those who still rely on traditional age-based segmentations. Age is simply not a reliable indicator of people’s actions or interests. The 20

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choices open to people across life stages have expanded, and aging populations are taking full advantage of them. Trend 3: Migration. It’s logistically easier now than ever before to relocate from one area to another—be it across a country or around the world. This phenomenon is raising challenging social and political issues. In W1, the debate continues over whether immigrants are a net benefit or drain on the recipient economy, and it has become a perennially popular campaign issue for some politicians, as well. Do we let them in? Do we keep them out? Several European nations are confronting these issues, made particularly acute as their native-born population growth has stopped and in some cases declined. Incorporating immigrants into national social/entitlement systems can present major political challenges. It is likely that politicians will continue to make a lot of noise about “cracking down” on illegal immigration, but in the end, we forecast, the net benefits that immigrants bring by doing both manual and high-valueadded knowledge work will keep the flows of migrants coming. One of the traditional strengths of the U.S. economy, for example, has been its willingness to embrace new people with new ideas. Many argue that it has been a key competitive advantage. www.wfs.org

Business implications: Organizations struggling to deal with the issue of growing diversity are particularly affected by this trend. In the future, more organizations will find themselves confronted with having to diversify their workforces in the face of a global economy that demands an international perspective to succeed. Trend 4: Population growth. About 10 to 15 years ago, a series of books came out sounding the alarm that population growth threatens Earth’s carrying capacity. The most recent statistics from the U.S. Census Bureau suggest that global population is going to top off at somewhere between 9 billion and 10 billion people (we’re closing in on 7 billion today). W2 and W3 have been proceeding through the demographic transition more quickly than some had anticipated, important because 95% of population growth will come from these worlds. As these nations develop economically, large families are confronting disincentives in the form of the high cost of raising children. Previously, more children meant more labor to work the farm. But the process of industrialization has diminished the economic advantages of having kids in the developed world. Most European countries and Japan are already below replacement-level fertility, and the projection is that global population growth will reach this mark by 2050.

Trend 5: Urbanization. The majority of the world’s population is now living in cities. In the highly developed world for instance, urbanization rates typically hover around 75%.

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Business implications: Ironically, a newly emerging “worry” is that soon W1 will have too few people and too few workers. This concern results from the common misconception that economies and organizations must continue to grow. The challenge brought by slowing population increases is that some of the “automatic” growth that businesses have experienced due to ever-higher GDP (fueled by population increases) will gradually decline. This is already happening in the United States, Europe, and parts of Asia. W2 and W3 are rapidly catching up. Trend 5: Urbanization. The majority of the world’s population is now living in cities. In W1, for instance, urbanization rates typically hover around 75%. W2 and W3 are in the process of rapid urbanization, as many of those countries are transitioning from an agricultural to an industrial economy. When that happens, people tend to settle in huge, multimillion-person megalopolises, often around national capital cities; one exception is the Nigerian mega­ city of Lagos. Thanks to technology, anyone armed with a laptop or PDA can connect to the world, and the workplace, via the Internet. As a result, some interesting choices will emerge about where to live and work. For decades, urbanization has been agglomerating people together, grouping them in

big brick or glass tubes called office buildings after they fight a daunting commute and joust for expensive parking spots. Many of these people go up 30 floors to sit in a cubicle and use a computer or phone all day— the typical activities of a knowledge worker. Why fight this battle in an age of telecommunications? Why not work at home, the local coffee shop, or any venue where you can plug in and stay connected, going to the office only when it’s necessary to physically meet with people? Business implications: Managing virtual workforces will present challenges to organizations. In the past, measuring the “good” workers by how many hours they spent at their desks was easy. Organizations will now need to devise new ways to measure productivity based on output or value created, rather than hours spent in the office. Rising Wealth Trends We characterize this economically based set of consumer trends as “rising wealth” to reflect the world’s rising standard of living—particularly in W2 nations such as China. Interestingly, this trend is challenging the fundamental assumption of scarcity, defined as the assumption that, in order for there to be wealthy people, there must also be poor people, and that a certain amount of le-

thal poverty is inevitable. Rising wealth suggests a need for an economic system based on a new assumption of abundance. The global economy produces more than enough wealth to support a comfortable standard of living for all three worlds, but it still hasn’t figured out an equitable way to distribute that wealth or produce it sustainably. T h e o p e n - s o u rc e m o v e m e n t (where computer developers post code they’ve developed online for free to be used and added to by other developers) is an example of how an abundance economy might work: Contributors give away their expertise to have a better product; in the process, they enhance their reputations and build networking connections that may later pay off in a “real” project or job. The open-source idea is spreading beyond software development. There is even a Web site for open-source prosthetics. Another indicator among young people, particularly in W1, is that they are less inclined to follow traditional paths to earning a living. Some, for example, may spend their day blogging and not getting paid, because they believe that if they provide value it will pay off at some point, sometime, somewhere. And they are often right. Somebody picks up one of their stories, which builds their reputation and eventually leads

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Trend 6: Asia rising. There are various estimates of when China will be the world’s largest economy. Note that this power will not be exclusively based on cheap labor. HSING-WEN HSU / ISTOCKPHOTO.COM

to a paid gig. We might call it the “karma economy.” Trend 6: Asia rising. The rise of Asia became real for me personally when I was chatting with a U.S. representative from a large Korean conglomerate. He was telling me that his company was interested in entering the U.S. market, but that their big push in the next five to 10 years was going be in China, because they saw it as a bigger opportunity. There are various estimates of when China will be the world’s largest economy, and there will be many debates about whether India might be the winner. Both China and India are ascending the economic ladder of development; workers are becoming more educated and skilled as legitimate players in the global knowledge economy. Singapore, for example, is a small island of 5 million that has ascended from W3 to W1 in just a generation. It has become one of the richest countries in the world thanks to the technological and knowledgebased prowess of its p ­ eople. Business implications: The twentyfirst century can be characterized as the Asian century. Asia’s economic and political clout is clearly rising. 22

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Many in the United States (the number one economy for some time now) are frightened by the trend. But it’s good news for the global economy. These W2 and W3 nations will be more economically and militarily competitive, but they will also offer large and lucrative markets for W1 organizations. Trend 7: Consumerism. For the first time, hundreds of millions of people in W2 and, to a lesser extent, W3 will be living in a consumer economy. As these nations become wealthier, the work and lifestyle patterns of their people will shift—and soon they will be able to purchase more goods and services as they build economies of specialized labor. Over time, the purchase of consumer goods becomes an increasingly important expression of one’s values and identity. For instance, being able to afford luxury branded goods is a way to signal to one’s peers that one has “made it.” In W1, on the other hand, there are growing questions about consumerism. One could argue that a primary assumption of our capitalist system is that consumption will make you happy. The more stuff one accumuwww.wfs.org

lates, the happier one should be. Data convincingly suggests that this is a dangerously flawed assumption. Yes, there is a correlation between income growth and happiness as nations modernize and citizens move beyond a survival mode. But in affluent, developed-world countries, studies show that more money does not equal more happiness. Although consumerism is still alive and well in the developed world, some early indicators suggest it may be changing. For example, there is the story of 10 San Francisco friends who vowed not to purchase a single new thing in 2006 except food and some bare necessities such as toilet paper, brake fluid, and underwear. People in more-developed economies will have to make choices about how to pursue happiness in the future. Business implications: The evolution of consumerism is likely to play out in different ways around the world, and companies would be well-­ advised to develop different strategies for approaching it in the different “worlds.” For example, whereas material goods are likely to thrive in W2 nations, having rich personal ex-

periences is increasingly important for people in more-developed countries. And an ongoing need for W3 is to devise strategies to reach those at the “bottom of the ­pyramid.” Trend 8: Middle-class growth. In affluent countries, particularly the United States, the middle class is shrinking as the upper and lower classes expand. But rather than haves and have-nots, it is more accurate to say the divisions are between haves and have-lots: The standard of living at the bottom of W1 is still higher than in much of W2 and W3. While the size of the growing W2 middle class in countries like China is difficult to nail down, it is growing along a similar trajectory to the one that places like Europe, the United States, and later Japan underwent a few generations ago, which created large numbers of “first-time buyers.” These markets will be the places to look for sales volumes to increase. Given that many affluent-nation populations and their middle classes are shrinking, the automatic growth that many businesses have become accustomed to will decline in these places. Thus, attention will turn to W2 and eventually W3 for growing the top line. Business implications: In the bifurcating W1 markets, a pattern of ­status-conscious shopping is emerging. Increasingly, consumers are willing to spend lots of money on “identity-related” purchases, while other less-important purchases are based solely on cost. Thus, we have people shopping at Gucci for a handbag and at Wal-Mart for dishwasher detergent and a new lawnmower. This suggests a need for business models where manufacturers and retailers can profit by making small amounts of customized products—especially those identity-based products. Trend 9: Time pressure. As never before, consumers in wealthy W1 nations consistently say they never have enough time to do everything on their to-do lists. Of course, the perception is often worse than the reality, as some of the pressure is selfimposed. A time-use study of the U.S. population by sociologist John Robinson at the University of Maryland suggests that people have more free time now than in the past—they

just fill it up as soon as they get it. The complaint goes something like: “Oh, I don’t have to go to choir practice. Great, now I can do boot camp…. I’m so busy!” A popular lament in some psychotherapy sessions is that people are becoming human “doings” rather than human beings, because they constantly feel the need to be doing something. Robinson’s research also suggests that free time is now available in smaller chunks—convenient for checking e‑mail, but inconvenient for reading a book. In W2 and to a lesser extent W3, free time is more likely to actually decrease as people spend more time working in their growing economies. This will be even more the case as those economies experience rapid growth. Business implications: Time will continue to be at a premium. Don’t believe it? Survey your colleagues and ask whether they would prefer a week of unfettered vacation—not the kind where it means double the work upon return—or the equivalent sum in pay. Don’t be surprised when vacation wins hands-down. The time shortage means that businesses may benefit if they provide time-saving products. It also serves as a reminder of the value of customer service. An automated call-response system that costs less than flesh-and-blood phone operators isn’t necessarily saving you money. If it’s a hassle to use, it isn’t just annoying your customers, it’s robbing them.

mow my own lawn? Is having a housekeeper a practical choice or an unnecessary indulgence? In many cases, it may make economic sense to outsource an activity. Business implications: Some people may feel guilty about spending money to save time, but as time pressure mounts, statistics suggest more people will get over their reservations. This values shift will provide great opportunities for an increasing number of businesses to earn money by offering convenience, performing tasks that people could do for themselves but haven’t the patience for any longer. *** This partial list is intended to provide a primer on the global trends in play today and how they might develop and evolve into the next dec­ade. It is a starting point for analysis, and we’ll follow up in the next issue with trends related to culture, social mobility, and women’s equality. We’ve suggested some of the business implications of these trends, but all of them also carry consequences for individuals, organizations, and nations. Understanding established trends such as these provides a foundation for thinking in a productive way about the future. The next step is to apply the knowledge by uncovering new opportunities, detecting threats, crafting strategy, guiding policy, and exploring new markets, products, and services. ❏

Trend 10: Personal outsourcing.

Consumers used to save money by doing their own chores, but today’s time shortage is leading consumers to outsource services they used to provide for themselves. Thus, a new breed of time-saving products and services is emerging. In W1, for example, pet sitters and personal concierges are both growth jobs. In W2, labor-saving devices such as refrigerators and dishwashers are as sought after and trendy as they were in the 1950s in the United States. These purchases free up time for participation in the paid workforce. The growing value of time-saving technologies and services will bring up some interesting choices for consumers. Is gardening a hobby or a chore to be outsourced? Should I

About the Author Andy Hines is the director of Custom Projects at Social Technologies. He co-founded and is currently chair of the Association of Professional Futurists. Thinking About the Future, his third book, co-edited with Peter Bishop, was published by Social Technologies in 2006. This article focuses on some the Top 20 trends affecting consumer life around the world, as judged by the futurists of Social Technologies. The list was developed for the sponsors of Social Technologies Global Lifestyles research program. The second part of this list, detailing trends in culture, gender equity, etc., will appear in the September-October 2008 edition of THE FUTURIST. For more information, visit www.socialtechnologies.com.

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