Generation X and Y to fuel post recession recovery? Read with caution!

March 21, 2010 | By Kim Walker

In the past two recessions, Baby Boomers quickly led the recovery. However, this group has been hit hard by the recession at a point in life when their financial commitments loom large and retirement is on the horizon. Marketers will need to look to the smaller Gen X generation and large Gen Y population to fuel growth in the initial stages of the post-recession recovery. Among Gen X, one segment that will have a meaningful positive impact on spending is “up-market affluents” given their life stage needs and above-average spending potential. All this according to a new report from PricewaterhouseCoopers and Retail Forward, entitled The New Consumer Behavior Paradigm: Permanent or Fleeting?. (Click to download)

As consumers in Asia tend to be more credit-conservative than their American counterparts, and the rapid recovery means that this research must be viewed in it’s intended context, that of the USA. I believe that 50+ consumers in the developed markets of Asia Pacific are, and will continue to be, most definite contributors to the recovery.

With new shopping behavior data and demographic trends indicating that an enduring shift has taken place as a result of the recent economic downturn, retailers and suppliers will need to adapt to consumers’ new shopping behaviors to succeed in today’s evolved marketplace and during the post-recession recovery,

As outlined in the report, shoppers will be more deliberate and purposeful in their spending, as conspicuous consumption will give way to more conscious or practical consumerism. Rampant deal-seeking will be replaced by more purchase selectivity and the use of shopping techniques and tools discovered during the recession. Additionally, the affluent segment of Generation X and the young Generation Y will lead spending in the recovery.

A higher proportion of Gen Y’s income is discretionary as a result of fewer debts and a less-urgent need to accumulate wealth in the immediate term relative to older shoppers. Furthermore, as this generation is accustomed to instant gratification and demands the latest gadgets, spending on technology staples-like MP3 players and smart phones-will remain a priority and create unique opportunities for tech-oriented retailers.

PWC spokesman added, “Retailers and suppliers must realize that there will not be a wholesale return to previous shopping patterns and behaviors. To succeed during the recovery, they will need to recognize that some shopper segments will still be in a ‘recession’ shopping mode. They must make sure consumer wants are aligned with the marketplace and turn more ‘need to have’ desires into the ‘must have’ needs of Gen X and Gen Y shoppers.”