Changing Demography and Your Future

Yes, Manufacturing Will return to U.S.  starting now and it's growth will accelerate over the next ten years! Does this sound too good to be true? It's not!

 
I was in a fast food restaurant this morning meeting with a client. It is the perfect meeting venue. It is so noisy that no one can eaves drop. They don't care how long you stay or what you order. The facilities are normally clean and have a nice bathroom. CNN is on a big screen TV. I love it. My new office.

I pointed out to my client that this restaurant also provides a perfect example of shifting demography. "Oh," he said, "Where?" "There, behind the counter" I said. There she was, a blond, blue eyed, English speaking teen girl. Fast food has not seen this demo in twenty years, now she was returning with a vengeance. Why? Generation Y. Generation Y (over 90 million native kids 23 and under) are overwhelming the entry level labor market. They are displacing the immigrants and this will naturally reverse all of our so called immigration issues. (Maybe we can sell the billion dollar wall we just built to Mexico to keep the unemployed Latinos from returning.) This home grown labor force will be the biggest and best one the United States has ever had. We chased manufacturing out of the U.S. during the last twenty years because of the anemic high cost labor force provided by Generation X (69 million people born 1965 to 1984). China was only too happy to to accommodate us by sucking all of our manufacturing off shore.

 Now China has its own issues precipitated by their ludicrous "One Child Policy" that has been in force for the last three decades. The net result is an elimination of their young labor force. Duh! China is now experiencing labor shortages, yes, labor shortages! This does mean higher wages. Couple this with expensive shipping, a falling dollar and run-a-way inflation and you have Chinese goods that have lost their appeal to Wal-Mart. Wal-Mart does more business with China than Germany does.

Yes, manufacturing will come back to the United States for all the right reasons. We will satisfy our own markets with our own labor and if the dollar stays low we will satisfy world markets as well.

Are you ready?

Labels: China , Generation Y, Manufacturing, U.S. Labor

A Generational Marketing Overview of The United States

There are five major generational markets in the United States. The distinctions of each generation are widely accepted by demographers and marketers and have been shaped by cultural circumstance, world events and above all, fertility. Because circumstance, events and fertility vary greatly, the U.S. generations, that are about twenty years in duration, vary greatly in size. This fact shapes each generation’s economic, social and political impact on the total U.S. population and has serious significance for marketers.

A wise mentor once told me early on in my marketing career that it is very important “to go fishing where the fish are.” I asked him why? This was a mistake. He just looked at me like I was a dunce and said “Because that’s where you will catch the most fish with the least amount of effort.” He went on to explain that it did not matter if you had a big expensive boat, sophisticated equipment and a crew of fishing experts, if the fish were not there you were not going to catch them. The same principals apply to marketers. I have watched large corporations with famous advertising agencies using award winning creative and huge advertising budgets chase markets that demographically no longer exist. The best example I can think of is Detroit automobile manufacturers scratching their heads because they can not figure out why they can’t sell as many cars to Generation X as they did to the Boomers. Too bad they didn’t count them.

Let’s take a closer look at the different U.S. generations

The G.I. Generation born 1905 to 1924 was once a huge consuming generation of about seventy million people when you combine native live births and massive European immigration. This generation is defined by it’s participation in WWII. As a market this generation has dwindled to about five million hearty soles that are eighty-four plus years old. Its consumption is largely limited to health care needs, assisted living and funeral parlors. (Contrary to popular belief the elderly market is not growing but will actually shrink dramatically over the next ten years.) Marketing to this group can best be achieved through their care givers who can be easily reached through conventional media.

The Silent Generation born 1925 to 1944 is the smallest generation of the last one hundred years. This generation is now about sixty-four to eighty-three years old. There are about forty to forty-five million Silent’s remaining out of the about fifty-three million born. As a market they have a presence but their consuming days are really behind them. They will buy anything that will help them maintain their independence, delay aging and stay in their own homes. They love to eat out. They are value shoppers who love a real deal. They can be reached with conventional media.

The Baby Boomers born 1945 to 1964 remain a consuming force to be reckoned with. About seventy-five million of them remain and they continue to devour age appropriate products with a vengeance, especially big screen HD TVs. The bloom is off the rose on their consumption however as the peak of the Boomer Generation is cresting the defining age of fifty years old. Their purchase of apparel and cars is most noticeably down, never to return to former levels. They control the Nation’s personal wealth and are retiring at a rate of about one every eight seconds. Remember if you want to do business with the Boomers make their lives easy, save them some time and don’t rip them off. They are easily reached with conventional media.

Generation X born 1965 to 1984 is now twenty-four to forty-three years old. Relative to the Boomers they are a small disappointing market owing to an alarming eleven percent decline in fertility during their birth years. They are consuming age appropriate products at normal rates but they can never consume at Boomer levels because there are nine million fewer of them. This numerical fact has dealt a death blow to many consumer product manufacturers who were caught flat footed and uninformed, most notably Japanese motorcycles in the early 1990s. Generation X has other issues. They don’t respond to conventional media. They are natives in the cyber world but are difficult to reach because the internet’s fragmentation.

Generation Y born 1985 to present are over ninety million strong, yes bigger than the Boomers. They are consuming at five hundred percent of the rate of their Boomer parents in adjusted dollars age for age when you take into consideration their influence on family purchases. We’ll see if this rate of consumption slows as Generation Y begins to pay for stuff with their own money. Generation Y is the first U.S. generation that routinely has had brand new cars in high school parking lots. Boomer parents are buying them houses as they begin to flood the marrying age. One karet diamond engagement rings are the norm. Japanese car makers recognized the merits of this market long ago but Detroit has been asleep at the wheel. Apparel sales will spike as Generation Y seeks mates. Wal-Mart will have difficulty serving Generation Y because their retail model can not bring fashion to market fast enough to satisfy a young fickle generation. In addition Generation Y will bring a new dimension to consumerism. They will not buy products from retailers and manufacturers with dubious ecological or humanitarian records. This leaves Wal-Mart and China out of the Generation Y picture. Also no amount of “Green Washing” is going to get by Generation Y. Generation Y like the small Generation X that precedes them is difficult to reach with marketing messages because their principal medium is cyber space. It is not impossible, just difficult. Ironically apart from brands that get established virally Generation Y could be the most brand diverse generation in recent history. Unlock the formula for efficiently marketing to Generation Y and you will print money. One very note worthy anomaly about Generation Y is the fact that they love snail mail, anything with their name on it.

Latino immigrants have essentially formed their own generation. Latinos came to the U.S. in droves to fill the entry level job vacancies unsatisfied by Generation X’s small numbers. This group is roughly twenty to forty years old and number anywhere from fifteen to twenty-five million depending on whose numbers you believe. This is a substantial geographically defined market that is here to stay. Even though this market is about the same age as Generation X don’t confuse the two. They are very different markets. The Latino market is free standing, unique and quite valuable. One area where Latino’s stand out as significant consumers is at the super market. They buy fresh, shop more often and spend more than average consumers. Latino’s can be reached with conventional Spanish or main stream media. Don’t make the mistake of translating ad messages in English to Spanish. This is very offensive to Latinos. Either leave them in English or create them in Spanish. This market has no where to go but up and while many of these immigrants will return to their native countries when the work dries up millions will stay, assimilate and make the United States a better place.

Generations are markets and generations age. This means that markets move. It is a measured pace and it never changes. It doesn’t speed up and it never slows down. When large generations/markets age toward products and services that are typically purchased at a certain time of life business will soar for these categories. Smart marketers will position their clients in front of this wave and ride it to success.

Don’t forget to go fishing where the fish are!

Wal-Mart Tries Again

I read in yesterday’s Wall Street Journal that Wal-Mart is making another try at fashion on the heels of a colossal flop last year. If you scroll back in my blog you will recall that I wrote in 2006 about Wal-Mart hitting a wall. I am going to pull some excerpts out of that entry and note them in italics. This new foray into fashion is clearly a different strategy than last year and may even have a chance at success, albeit slim. So what’s the difference? Wal-Mart is aiming at Generation Y, kids under twenty-four with fun cheap current fashion with a deep level of assortment. From my perspective this is exactly what they need to do because Generation Y is the only emerging fashion market along with being the biggest market ever in U.S. history. Last year Wal-Mart attempted to sell “high” fashion to the Baby Boomers and they crashed and burned.

(From 2006 Blog “Wal-Mart Hits a Wall”)

Wal-Mart is essentially a Baby Boomer (eighty million people born 1945 to 1964) based business but I don’t get a sense that they are aware of it. Wal-Mart’s retail concept is narrow, cheap and deep. This means their success is built on low price, limited selection and vast quantities (generally made in China). Where they are going to get tripped up is on selection. You see Wal-Mart has figured out what the mature Boomer market buys. They have then refined this demand to the narrowest selection possible, almost telling Boomers what they will buy. Boomers in turn are OK with this because when you are between forty-two and sixty-two years old you have pretty defined tastes and preferences that influence your buying of stuff. If Wal-Mart does not have what Boomers really want but does have something close at a very low price, Boomers will buy it. So where is the rub? Simple. When a consumer hits about fifty years old their demand for stuff begins to subside. At sixty years old you pretty much have all the stuff you need and then some. Your body has stopped changing so you can wear clothes longer, a lot longer. If you want to see what was fashionable thirty years ago go to a Miami retirement community. The point here is that the bloom is off the rose of the Boomer’s consuming. The Boomer population is a huge bell shaped curve with many Boomers turning sixty at its leading edge and with its very top cresting fifty years old in 2007. All of this means that Wal-Mart needs to find a new market fast if they want to continue doing business. But where do they turn? The two US generations over sixty do not have the critical mass to serve their infrastructure. The population (eighty million) now twenty-two to forty-three years old in the US is a non-homogeneous combination of the undersized native born Generation X and the free standing market of Latino immigrants. (Latinos are not evenly dispersed through out the United States but live in geographical pockets)

So who’s left? Generation Y, born 1985 projected to 2010. Generation Y will be the largest and most powerful consumers this nation has ever seen. They are already consuming at five hundred percent of their parents level in adjusted dollars age for age. Will they be the solution to Wal-Mart’s sales problems? NO. Generation Y is an emerging market, a huge bell shaped curve with its peak at age seventeen. They are inhaling entertainment products, fashion, food, electronics and transportation. Selection is everything to them. They do not care about low price. Their tastes change daily. They don’t know what they will want six months from now. Wal-Mart’s limited selection low price offering to the Boomer will not and can not translate to Generation Y.

Can Wal-Mart pull off this transition into Generation Y fashion? I don’t think so. Let me site a few of the reasons:

Fashion is a tough business that requires a lot of expertise and intuition. Just when you think you know what’s hot- It’s not! Markdowns on fashion are huge because something that is out of style doesn’t sell at any price. Fashion works best with small retailers who can get in and out of small quantities fast. Fashion is all about selection. Fashion is not driven by price. Fashion is about very fast turnaround from trend to manufacture to selling floor. In case you haven’t noticed I have not described Wal-Mart. If Wal-Mart wants to succeed in the fashion business they need to really change their corporate thinking and sales model. Is this possible? Yes. Is it probable? I don’t think so.

Wal-Mart has other issues that will play into their fashion businesses’ success or failure. Wal-Mart and China are joined at the hip. Wal-Mart does more business with China than Germany does. Despite popular belief China’s economy is not healthy or stable. Read my blog about the net affects of China’s one child policy on their emerging labor force. It is much smaller because by their own official estimation China has prevented 400 million (this is not a typo) births in the last thirty years. A smaller labor force in China means higher labor costs and higher product costs for Wal-Mart. Couple this with higher shipping costs, a falling U.S. dollar, a slowing U.S. economy and you have the making for a still born fashion effort.

Oh yes, one more thing. Generation Y is going to be the greenest most humanitarian generation in the history of our Nation. If you want to do business with them you had better be very green and very nice to your fellow man. The popular perception is that Wal-Mart has a dismal record on both accounts. Perception is reality. This fact could kill their business all by itself.

Good News for the United States

I do a radio talk show in Hartford, CT USA with Brad Davis on WDRC AM. The show is clearly conservative and very popular. Davis has me on once a month on the first Wednesday from 8 to 8:30 AM. Davis has a producer, Dave Thatcher, who has a knack for landing big name interviews. Last week my session was followed with Davis’ interview with Jesse Ventura, the former celebrity Governor of Minnesota. I kind of wondered why Davis keeps me coming back because I am really not a celebrity. I asked him recently and he said it was because my stuff is interesting and for the most part is good news that he does not hear anywhere else.

He said that his audience could use a little good news. Sad but true.

So if it’s good news you want its good news you’ll get, because there is a lot of it. Remember that my perspective is demographic.

The United States is in the best position to grow/ develop/advance economically, socially, politically and culturally as compared to all other Western nations. Why?

We are the only Western Nation that is having kids. Europe is not having kids and will be overrun with Muslim immigrants who overwhelm the continent in fifty years. Muslim culture and Western culture is non-homogenous. Say goodbye to Europe as we know it.

In business happiness is a positive cash flow. In demography happiness is a positive fertility rate above replacement level. The United States is just barely above replacement level but our birth rate is a very healthy four million plus per year thanks to our Latino immigrants. Half of the live births in the U.S. in 2007 were Latino. This is a very good thing. Latino culture is Western culture. They are wonderful immigrants who assimilate quickly.

Generation Y is huge. There are about ninety-six million of them under twenty-four years old in the U.S. This huge emerging labor force will bring industry back to the U.S. with a vengeance. China has eliminated its future labor force with its ludicrous one child policy. See the previous blog entry. Generation Y will experience high unemployment that will precipitate a resurgence of entrepreneurial spirit that we have not seen in the U.S. since the Baby Boomers opened millions of small businesses in the seventies. Small businesses are the back bone of our economic health. Generation Y is a consuming generation like no other. Consumption is consumer spending and high consumer spending is economic health. Our armed forces, business, industry and government will have its pick of the best and brightest. Good talent will advance our lead over the rest of the world especially in technology, well beyond where it is now. Generation Y is green through and through. They will be the engine that will position our Nation as the world leader in improving our planet’s ecology. Lastly Generation Y will be champions of human rights and that’s a very good thing.

So remember the United States has always been a complex country, but Generation Y is going to make it an even better country.

The Greatest Demographic Blunder in the History of the World

I have been warning of the perils of China’s one child per couple restriction for about ten years. The utter stupidity of this policy points up a short-sightedness on the part of the Chinese government of epic proportions. This is not just stupid, this is scary stupid. The Chinese government has not just shot themselves in the foot they have blown their foot off. According to a New York Times article of February 29, 2008 by Jim Yardley, it is estimated that China has managed to prevent roughly 400 million births in the last three decades. And as if that is not enough, culturally Chinese couples have overwhelmingly favored male children. I don’t even want to discuss gender driven abortions or what they did with the female infants that did come to term. I do thank God that some made their way to the U.S. and other countries through adoption.

But wait, let’s just think about this. China, the country on the fastest track in the world to economic development and modernization has carved out 400 million people from its population thirty years old and under. Moreover this anemic under thirty population is predominantly male. In the book “Bare Branches, The Security Implications of Asia’s Surplus Male Population” Valerie M. Hudson and Andrea M. Den Boer point out that high male to female ratios often trigger domestic and international violence. Duh! Who are they supposed to marry? “Bare Branches” is dead on. It gets worse. According to the Times article: “China’s fertility rate is now extremely low, and the population is rapidly aging, especially in urban areas. Experts have warned that China is steadily moving toward a demographic crisis with too many old people in need of expensive services and too few young workers paying taxes to meet those bills.” There is more. China’s single biggest economic advantage is cheap labor, nearly at the slave level. However according to the Times article “China’s biggest manufacturing centers are already facing labor shortages.” A labor shortage means higher wages. Higher wages mean the loss of China’s competitive edge, their only competitive edge. China is a country that has sealed its own economic doom. We need to watch the attractiveness of higher price Chinese goods as labor costs escalate along with higher shipping costs because of higher oil prices. China’s economy is headed south. So, what is the world going to do with a country of 1.3 billion people when they get hungry?

What is the answer here? I don’t think there is one. I think we just wait until the demographic time bomb explodes. The world is going to be an interesting place.