Aging and Asia: Implications for Marketers and Retailers
November 12, 2012
In a book entitled 100 Plus, author Sonia Arrison writes, “We are at the cusp of a revolution in medicine and biotechnology that will radically increase not just our life spans but also, and more importantly, our health spans.” [“Bioengineering Methuselah,” by Nick Schulz, Wall Street Journal, 31 August 2011] Schulz, a fellow at the American Enterprise Institute, reports that Arrison claims this revolution in longevity will “change everything, from careers and relationships to family and faith.” If the revolution does occur, it will also change the types of products that will be produced and marketed. In previous posts, I’ve noted that analysts are already describing how manufacturers and retailers are having to deal with a bifurcated market that involves older and younger consumers. Their tastes, shopping habits, and product choices vary widely. Imagine how differentiated products are going to have to become if a significant percentage of the population lives beyond 100.
Before we go too far down this line of reasoning, however, Schulz reminds us that “it’s worthwhile to keep in mind the ecstatic predictions a few years ago of the breakthroughs that would be made possible by human-genome sequencing—and the modest gains that have so far resulted.” He concludes, “Predictions are easy; science is hard.” Schulz concludes his op-ed piece with these thoughts:
“If humans do begin living to 150, then what? If Medicare and Social Security are in trouble now, what happens when they must support multiple generations of retirees? In Ms. Arrison’s mind, we’ll be living healthy, productive working lives until very near the end. The more pressing concerns, for her, have to do with the strain on natural resources and the added pollution of a swelling world population.
Noting that similar worries have been raised whenever technology alters social conditions, Ms. Arrison argues that apocalyptic prophecies are unlikely to be realized. Increasing wealth and mankind’s adaptability and ingenuity mean that as new problems emerge, new solutions will be forthcoming. ‘In looking at the trends of history,’ she says, ‘we can see that even when there are downsides to a particular wealth- or health-enhancing technology, the problem is often fixed once the population reaches a point where it feels secure in spending the resources to do so.’ Ms. Arrison’s sunny outlook is infectious, and surely mankind does have remarkable powers of problem-solving and adaptation. But one can’t help wishing, a bit ahead of time, for some wise counsel from one of those 150-year-olds she envisions, who might be able to tell us whether all the effort and all the dreaming were worth it.”
Regardless of whether the scientific breakthroughs discussed by Arrison occur, two are certain. First, scientists “are working furiously to make it possible for human beings to achieve Methuselah-like life spans”; and, second, “the number of people living to advanced old age is already on the rise.” [“Living to 100 and Beyond,” by Sonia Arrison, Wall Street Journal, 27 August 2012] It is this latter trend that I want to discuss. As my friend Thomas P.M. Barnett, Chief Strategist for Wikistrat, is fond of saying. China may get old before it gets rich. And China is not the only Asian country encountering demographic challenges. In a paper published by the Asia Development Bank, Jayant Menon and Anna Melendez-Nakamura, wrote, “Within the next few decades, Asia is poised to become the oldest region in the world; reforming policies and creating new structures and institutions to address this challenge is a huge and complex undertaking that requires a big head-start.” [“Aging in Asia: Trends, Impacts and Responses,” February 2009] Although Menon’s and Melendez-Nakamura’s advice was primarily aimed at Asian governments, the advice to get “a big head-start” is just as important for businesses. Like Barnett, Menon and Melendez-Nakamura wonder if populations in emerging market countries in Asia will “go over the hill before getting to the top.”
Rapidly aging Asian populations are going to have profound implications for the global economy. The Lex Team at the Financial Times writes, “Step back from the eurozone crisis and falling commodity prices for a minute and consider the role of demographics in investments.” [“Asian demographics – grey area,” 19 October 2012] The team writes:
“In just five years China’s workforce will start to shrink. By 2030 the median age of Japan’s population will be 51 and in China it will be 43, according to Deutsche Bank. By 2050 the share of 65 year olds in the population in most of Asia will more than double. Asia’s demographic dividend is almost over and its impact is far reaching. Japan’s depleting workforce has been directly correlated with the demise of its economic growth for the past 60 years. That is not to say China’s economy will stagnate as its workforce shrinks, but it will hurt labour costs further.”
The op-ed piece goes on to note, “Ageing populations are not all bad, though. In Japan it is pensioners who are propping up consumption as they spend their hard-earned savings on things such as package tours, convenience food and medical care.” That goes directly to my earlier point that manufacturers and retailers are increasingly going to have to deal with a bifurcated market that involves older and younger consumers. Currently in Asia “new products and services for the elderly” are the focus of many opportunistic companies, and “health-care-related businesses are seeing soaring demand.” [“Businesses Focus on Region’s Aging Population,” by Juro Osawa, Wall Street Journal, 21 August 2012] Osawa reports, “In Japan, companies that previously had little to do with the issue of aging have jumped on the bandwagon.” Osawa describes the current demographic situation with regards to aging. He writes:
“Japan’s population is the world’s grayest, according to a 2009 United Nation report, with nearly 30% aged 60 or older. Other parts of Asia, such as China, Taiwan, Hong Kong, South Korea and Singapore, are also anticipating a surge in the percentage of elderly citizens. In China, people over the age of 60 now account for 13.3% of the country’s population of 1.34 billion, up from 10.3% in 2000, according to the National Bureau of Statistics, and the aging trend is expected to accelerate.
Combine those demographic factors with Asia’s increasing urbanization and you can easily see that the business landscape for manufacturers and retailers is going to change dramatically. If they are to succeed, they need to understand this landscape in a more defined way. As I wrote in a post entitled Tapping the Economic Power of Mega-Cities: “Emerging Big Data analytic solutions can help highlight … differences [such as age, cultural preferences, etc.] so that manufacturers and retailers get the right products to the right people in the right amounts. Sometimes the differences between regions (or even cities) are difficult to discern. Analytic techniques are now available that can recognize these differences in a deep, substantive way and on many levels. Targeted marketing will be critical if western companies are going to be successful in emerging markets.”
If Sonia Arrison is correct and scientific breakthroughs result in longer life and health spans, companies targeting aging consumers are going to have to look beyond health care products and services to a whole range of products and services that cater to a healthier, active group of older adults. There are still a few years available for planning, but I wouldn’t wait too long to start. Big data is going to be very useful in helping understand just how older individuals are changing and the lifestyles they want to live. Baby boomers have proven during the current recession that older consumers can be a lifeline for businesses during hard times. That will be as true in the future as it today.