Generation spend
By Gretel Hunnerup
To sell effectively, it's crucial that retailers understand the differences between the spending patterns of each generation. GRETEL HUNNERUP reports.
In an article published in The Age, demographer Bernard Salt took a trip down memory lane to illustrate how the expectations of consumers have steadily risen over the course of a single generation.
"In the 1950s and 1960s, Australian children were ignorant of concepts such as branded clothing," Salt wrote. "No one went on fancy holidays (and) the income that sustained these types of households was based on the earnings of a single male breadwinner. The 1970s was the era when baby boomers entered the household formation stage of the life cycle. Levis, Adidas and Kentucky Fried Chicken surfaced in advance of a broader invasion by the likes of McDonalds, Ralph Lauren and later Nike. By the early 1980s, Gen X kids were wearing cheap digital watches."
It took just 40 years for this dramatic transformation to take place and it raises the question of what lies ahead for the Australian consumer.
"Just when you think we can spend not one cent more, or that we can leverage no more credit, society and economy continually morph and shift to seek out new ways to extend the spending," Salt concluded.
If Salt’s predictions prove correct then jewellery retailers have much to look forward to. Despite the HECS debts, mortgages and rising petrol prices, uni students, working mothers and retirees will all continue to spend money on jewellery because that’s what they’re wired to do. The real question is not if or when they're going to spend, but where. Retailers who can capture the attention of the consumer will win the business.
This year, the number of Australians over 45 will surpass those under 45, making the baby boomers a hugely influential consumer group.
According to Gill Walker, founder of boomer marketing specialist Evergreen, people aged 45-64 enjoy the highest discretionary spend.
"It’s not what they earn, but how much they can spend on themselves at the end of the day," she says. "Boomers can afford to spend a bit more on products – luxury goods appeal to them – and that’s why I believe jewellery interests them more than other generations. They’re also going through a multi-faceted phase of life and they might need jewellery for golfing, working and looking after grandchildren. Mature women are happy to buy for themselves because they like to feel in control of their own money, but the sale needs to be done face-to-face as there’s quite a lot of distrust over the internet."
Following eight focus sessions with female boomers, Walker found that mature women felt " ignored by advertisers because there was a lack of ‘authentic’ older women in advertising and, in many cases, the adverts were irrelevant to their needs. Mother’s Day advertising, for example, is preoccupied with younger mothers," she continues, "but what about the grandmothers? They shouldn’t be ignored."
As for how boomers like to be engaged once in the store, Walker says: "They want to be treated with absolute respect and not ignored at the expense of a younger person. It’s a good idea to have seats you can easily sit on – furniture is often so modern you can’t get out of it – and make sure the lighting isn’t overly bright because when people age they can suffer from visual acuity."
On jewellery styles, Walker stresses the need, above all, for jewellers to consider their clasps: "Watch an older person with those fiddly little clasps! They can’t manage them on their own so they end up buying things they can put over their neck. I think there’s a massive opportunity for jewellers to work with this."
While the boomers can generally be categorised as enthusiastic spenders, members of Gen X – those born roughly between 1965-1979 – tend not to open their purses so readily.
Penny Burke, director of marketing consultancy Essence Communications, explains why:
"They’re a fairly burdened generation – they’re paying off a sizeable mortgage and they’re saving to send their kids to private schools. They were also old enough to feel the impact of the economic downturns in the 1980s and, as such, they’re now a very careful, rule-oriented group of people who believe you must work hard and pay your dues."
Generation X also happens to make up the smallest generational group in existence, according to the Australian Bureau of Statistics, which claims there are 3.2 million of them compared with around 5.4 million boomers and 4.5 Gen Ys; however Gen X shouldn’t be written off.
In 2005, an American Express Platinum Luxury Survey of a cross-section of 770 wealthy consumers in the US found that Gen X members actually spent 18 per cent more annually on luxury goods than boomers did.
Burke guesses that they are more likely to purchase a smaller amount of top-quality pieces: "I think you’ll find they’ll cling onto those traditional views about jewellery. They think costume jewellery is cheap and trashy and they would never wear a fake diamond or mix their Longines watch with a cheap bangle, for example. But they certainly like the concept of rewarding themselves."
Generation X typically investigates before making a purchase and is likely to stick with jewellery stores they trust, according to Burke.
"Basically they don’t want to get ripped off," she says. "They would rather become an expert themselves by researching than to trust someone they don’t know. They key is to get them interested in the first place."
Given the myriad of findings that Gen X members are hard to reach from an advertising perspective, Burke believes a good way to attract those aged 30-42 is to be well-versed and to provide a bit of old-fashioned service.
"They will want the bloke in velvet gloves to lay jewellery out in front of them and give them the whole story," she concludes.
Finally, there is the youthful Generation Y – those born between 1979 and 1990, and who grew up with the internet, pay TV, bottled water and packaged overseas holidays.
The first of the Gen Ys turned 27 in 2008, so their relevance in the consumer goods market will grow over the coming decade.
In fact, a major study conducted by Australian consulting firm Leading Edge found that one third of people between 18-24 increased their spending on new technology, takeaway and going out last year despite the economic slowdown.
Many generalisations have been made about the spending habits of Generation Y in recent years: they’re famous for buying on impulse; they’re into brands; they have a disposable attitude towards goods; and, they hate waiting.
Burke agrees with this profile to a point: "They’re very much the live-for-today generation and in terms of jewellery, they’re happy to fake it until they make it, as long as it looks good. They will wear a different piece of jewellery everyday and there won’t be any sentimentality attached to it. In this regard the challenge for jewellers is to sell them an authentic pearl, for example, when they’re just as happy to get a fake one produced in China for five bucks."
Retailers stocking costume jewellery clearly stand to benefit from Gen Y consumers; however, Burke says, there’s a second type of Gen Y: those who want an experience when they buy.
"They want to be romanced, they want to know which side of the mountain the gold was mined from, and price won’t be so much of a factor so there’s an opportunity for jewellers to work their margins pretty hard," she says.
Burke believes retailers can attract this group by taking cues from high-revenue ‘concept’ stores: "The Apple store in 5th Avenue for example, is like a toyshop – they’re retailing the experience that technology is the gateway to the world. I don’t see that happening with jewellery stores at the moment because everything is still behind glass cases. Young people want to express their sense of self, so jewellery retailers would stand to benefit by offering some sort of service where they can design their own pieces."
And while members of Gen Y are shunning fine watches for cell phones and iPods, Burke believes the merging of fashion and technology may prove advantageous for innovative jewellers in the years to come: "In the old days technology used to mean big, which meant the opposite of fashion, but now it’s small and can work quite well as a fashion statement."
Posted February 01, 2010