The World's Fastest-Growing Market Segment
Despite the improvement of the global economy in recent months, overall levels of global economic growth remain well below the levels of the years before the financial crisis. Developed economies have performed a little better than expected this year, but growth in most of these economies is a far cry from the levels that they achieved in previous decades. Likewise, emerging markets in Asia and Central Europe are mostly growing at a strong pace, but elsewhere, emerging markets are struggling to generate any significant growth. Altogether, it has been harder for businesses and investors to find growth markets over the past few years than in the period before the financial crisis.
However, there is one market segment that is providing both consistent growth today as well as the prospect for even higher rates of growth in the years and decades ahead. This growth-generating segment of the market is the over-65 population that is expanding rapidly in all important markets around the world. With people living longer, and with birth rates falling, the over-65 market segment will not only grow in size, but also in terms of its share of the total global market. In addition, the over-65 market is accounting for an ever-greater share of global wealth, particularly in developed markets. As a result of the growing size of the over-65 population, and this population’s growing financial power, this segment of the market is all-but-assured to provide for growth opportunities that will exceed those found in nearly all other market segments around the world.
So far, most of the growth of the over-65 segment of the population has been found in the world’s developed economies. This is due to the fact that life spans have increased dramatically in wealthier countries over the past 100 years. For example, the average life expectancy in the United States in 1917 was 51 years. Today, it has risen to more than 80 years. Moreover, many developed economies, particularly in Europe and Asia, have seen their birth rates decline dramatically in recent decades. As a result, the over-65 share of these countries’ populations is rising significantly. In fact, in some of these developed countries, the over-65 segment of the market is providing nearly all of the growth for those countries’ economies, as other age groups decline in size. For example, 28% of Japan’s population today is over the age of 65, while in Germany, this figure is 22%.
In these developed countries, the over-65 population has benefitted from generous welfare systems and higher wage levels so that today, this segment has accumulated a great deal of wealth and purchasing power. This makes the over-65 market in these wealthier countries a very attractive market for the providers of goods and services. However, as these countries’ populations continue to age, and as a greater share of their populations is older than 65, these countries face a major challenge in transforming this segment of the market from one that is solely a consuming segment into one that is also productive. If not, many developed countries face a dire economic future as the costs of supporting such aging populations spirals out of control.
Thus far, developed countries have been the focus of most of the opportunities provided by the expanding over-65 segment of the market. However, the real growth opportunity for this market segment is to be found in emerging markets. Today, 400 million people living in emerging markets are above the age of 65, less than double the total living in developed economies. However, by the middle of this century (which is just a generation away!), more than 1.2 billion people living in what are currently countries classified as emerging markets will be over the age of 65. This is nearly four times the estimated 345 million people that will be over the age of 65 in developed economies in 2050. A large share of this over-65 population will be found in Asia’s leading emerging markets such as China, India and Southeast Asia, where life expectancies are soaring and birth rates are falling.
This expansion of the over-65 population in emerging markets will provide for many major growth opportunities for businesses and investors in the future, but will also provide one of the greatest challenges facing these countries as they move forward. Undoubtedly, products and services aimed at the over-65 population in emerging markets will be in great demand, particularly as most emerging markets do not provide the social welfare systems that are in place to support this segment of the population in developed economies. Of course, this lack of support for the over-65 population will also be a major challenge for these countries as well, one that will potentially prove to be a major drag on their growth if they are unable to increase the productivity of this segment in the coming years. As such, this segment will undoubtedly provide for major growth opportunities in emerging markets, but could also prove to be the greatest challenge these countries will face in the future.
The implications of the aging of the global population and the dramatic expansion of the world’s over-65 segment of the population are immense, and will result in some major changes for the global economy in the coming years. One challenge will be to ensure that this segment of the population becomes more productive, and not just a segment that must be supported by a shrinking working-age segment of the population. While automation will undoubtedly benefit the over-65 population over the longer-term, the benefits that this and other technological changes will bring might take longer to be realized than many hope for today.
In the meantime, the over-65 segment of the population is certain to provide some of the most attractive opportunities for growth for businesses and investors around the world for the foreseeable future. For example, this segment of the market will need more and more goods and services designed specifically for its needs and wants, a trend that we can already see today. Moreover, the products and services that are currently aimed at the over-65 market in developed economies might not be the ones that are needed in emerging markets, given the different social systems and structures in these countries. As such, those businesses that can provide the right goods and services to this vital segment of the market stand to realize significant growth in the years ahead, while investors that focus their activities on the providers of these goods and services stand to realize a significant return on their investments. Without a doubt, the over-65 market will be one of, if not the, leading growth markets in the 21st century.