Significant demographic challenges along with economic and technological forces will bring about unprecedented changes in consumer behavior, according to a new report from Deloitte Touche Tohmatsu Limited (DTTL), Consumer 2020: Reading the signs.
The report, which was presented at the National Retail Federation in New York on January 11, draws together insights into economic and demographic trends across the world, considerations of finite resources and sustainability, and the ever-more dramatic impact of technology on our daily lives.
The fertility rate has fallen dramatically in general within Middle East countries. In the United Arab Emirates, as an example, the fertility rate has dropped from an average of seven children per woman in the 1950s to less than two in 2010. Falling fertility rates in Europe, meanwhile, mean the continent faces losing 60 million people over the next five decades.
“The shrinking of a population in the Middle East consequently results in a similar diminishing of the labor force and national consumption power,” said Nasser Sagga, Audit Partner at Deloitte & Touche Bakr Abulkhair & Co. “As a result the growth potential of the country’s economic output becomes weakened.”
The problems are only multiplied by rapidly improving life expectancy, resulting in an imbalance of age distribution, and therefore, an aging population and the old age dependency ratio – the number of people over the age of 64 dependent on working age people (aged 15 to 64). The UAE’s old age dependency ratio is predicted to rise from around 1% in the year 2000 to just under 20% by 2050.
Global economic re-balancing
The report posits that over the coming decade we will see a re-balancing in the global economy, as countries that previously saw economic growth that was fueled by heavy borrowing and excessive consumer spending move to an era of export-driven growth. Conversely, countries whose growth came from exporting to borrowing countries will no longer be able to rely on such markets. Countries such as China will shift away from export-oriented growth toward growth driven by domestic consumer spending.
This fundamental change in the structure of the global economy will shift the manner in which retailers and brands obtain growth. In the U.S. and Western Europe, this means growth will most likely come through market share gains rather than by simply latching on to a growing market. For countries like China and India, this adjustment means taking measures to stimulate consumer spending, such as liberalizing consumer finance or improving social security in order to discourage saving.
Communicating, connecting, and socializing
Methods of engaging consumers in adopting more sustainable behaviors or purchasing more products and services will no longer just be about marketing and communicating. Rather, customer engagement will be about connecting and socializing with them. Consumers now have the power of information at their fingertips, enabling them to comparison-shop and make purchases anytime, anywhere. This trend is likely to accelerate, as mobile communication is expected to be an ever-larger transformative technology in the future, as it provides independent access to information.
Trust will remain a key issue with consumers, who will continue to trust peer recommendations over company information. Additionally, the sense of customer loyalty that existed in previous generations will be more short-term and influenced by social networks.