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A.T. Kearney Consumers@250 Study: America's Next Commercial Revolution: Influence Vs. Affluence

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A.T. Kearney Consumers@250 Study: America's Next Commercial Revolution: Influence Vs. Affluence A.T. Kearney Consumers@250 Study America’s Next Commercial Revolution: Influence vs. Affluence Influence, personalization, and trust will drive the future of consumer goods and retail. America’s Next Commercial Revolution: Influence vs. Affluence 1 Prelude to a Commercial Revolution America’s business landscape is being dramatically transformed as a series of dynamic tensions emerges from the collision of two radically different principles of commercial and social organization. Affluence, the traditional approach to growing markets and establishing social status—based on mass production, distribution, and media models—is being success- fully challenged by Influence, the ability to instantly move markets through the amplification and reach of an individual voice or a community of voices. This paradigm shift is the cornerstone of America’s Next Commercial Revolution: Influence vs. Affluence, A.T. Kearney’s study of US consumers, their changing attitudes, and the likely impact they will have on all consumer-facing industries. The study is part of A.T. Kearney’s ongoing Consumers@250 research, which seeks to describe what American consumers and the businesses serving them will look like in 2026, when the nation celebrates its 250th birthday. The shift from Affluence to Influence is permanently rewriting the rules of global consumer consumption patterns. As this report demonstrates, retailers and branded consumer goods manufacturers now face a historic challenge. Those that accept the challenge and adopt new ways of thinking about their brands, organizations, customers, employees, and even vendor relationships, will prosper. Those that do not will continue to suffer declining returns. Three themes emerged from America’s Next Commercial Revolution: • The shift from Affluence to Influence—arising from a perfect storm of demographic shifts, changing values, and hyper-connectivity—is permanently rewriting the rules of global consumer consumption patterns. • As a result, the mass market of the future will thrive on three fundamentally different principles: influence, personalization, and trust. • Consumer brands and retailers can appeal to future consumers and take advantage of new technology-enabled ways to influence and sell, with their ability to engage consumers in the digital world becoming more crucial than ever. From Affluence to Influence: The Three Drivers of Change Under the Affluence Model, capital both directs and controls markets. Capital is also how businesses keep score. Success is defined by market share, gross and net profits, and quarter- over-quarter and year-over-year financial performance. Change is driven top-down. Significant resources are expended on mass media marketing vehicles deployed to lead consumers to believe their self-worth exists in direct relationship to what they buy. If Affluence Model shoppers had a mantra it would be “I am what I own.” America’s Next Commercial Revolution: Influence vs. Affluence 1 In contrast, America’s Next Commercial Revolution found that individual consumers sit at the center of the Influence Model, which sees market development in terms of one person’s ability to create change and build community by influencing her or his peers, retailers, CPG manufac- turers, the media, and governments. Influencers rely on social media and social networks to amplify the power of their voices, facilitating the formation of ad hoc coalitions to address a variety of causes. Under the Influence Model, she or he who can enact the greatest behavioral change wins, regardless of his or her financial position (see figure 1). Figure In the Inluence Model, consumption is driven largely by personal values From “Aluence”-driven To “Influence”-led Consumers “I am what I own” “I am what I do” Consumption drivers Value Values Relationship Transaction-based Trust-based Business models Static Dynamic Marketing “One size fits all“ Personalized Need to understand “The big trends” “The signals” Source: A.T. Kearney analysis As noted earlier, the study traces this tsunami of change to three forces: demographic shifts, changing values, and hyper-connectivity. Demographic shifts: major generational and economic trends The study notes that in 2026 the American market for consumer goods will—for the first time in history—include six unique generations (see figure 2 on page 3). We call two of them—the Silent Generation (born between 1928 and 1945) and the Alpha Generation (2017 to 2023)—the Bookend Generations, because of their limited purchasing impact in 2026, when the youngest “Silent” will be 81 and the oldest “Alpha” will be only 9. That leaves four high-commercial-impact generations: Baby Boomers (1946 to 1964); Gen X (1965 to 1980); Millennials (1981 to 1997); and Gen Z (1998 to 2016), the last age cohort to have members born in the 20th century. When it looks across these generations, the report sees an American population that is bigger, older, less traditional, more diverse, more urban, and certainly more unequal than at any other point in history. The size of the US population will explode from about 140 million in 1945 to an expected 350 million by 2026. By then, Americans’ median age will have risen from 29 in 1945 to 37.3. America’s Next Commercial Revolution: Influence vs. Affluence 2 Figure By , there will be six generations of consumers in the market Baby Millennials Gen Z Boomers Gen X Alpha Gen Silent Gen – – – ­ – –­ ­–? million million million million million million Note: Data was taken from the approximate end year of each generation: Silent (), Baby Boomer (), Gen X ( ­), Millennials (), Gen Z (­). Sources: US Census Bureau National Population Projections; A.T. Kearney analysis We also are becoming far more diverse. Between 2016 and 2026, the US population will add an additional 13.7 million Hispanics, 4.7 million Asians, 3.6 million African-Americans, and 2.6 million “others,” but only 1.3 million more Whites (see figure 3 on page 4). While “minorities” are already statistical majorities in cities such as Detroit, Miami, Houston, and Los Angeles, Gen Z will be the first age cohort in American history to fully experience the death of a “majority” at the conceptual level. Simply put, fragmentation will make the idea of a majority irrelevant on any dimension. In 2026, the American population will be bigger, older, less traditional, more diverse, more urban, and certainly more unequal than at any other point in history. America’s Next Commercial Revolution also found that new households are increasingly nontraditional. In 1945, only 10 percent of children 18 years old and younger were being raised by a single parent, and that statistic considers factors including war deaths and the number of people serving in the military. By 2016, that figure had jumped to 28 percent. By 2026, the traditional Silent Era household—two married, heterosexual parents with at least one child—will account for fewer than 20 percent of all US households. Instead, we will see a America’s Next Commercial Revolution: Influence vs. Affluence 3 Figure The US population is becoming increasingly diverse Population growth by race/ethnicity –, millions . million . million . million . million . million population population African- Hispanic Asian Other White American Sources: US Census Bureau National Population Projections; A.T. Kearney analysis wide variety of living arrangements and domestic identities, including households of one, LGBTQ households, genderfluid and agender households, seniors living together to share costs, multigenerational households, domestic partnerships, and almost any and every other living arrangement one can think of. The implications for marketers conditioned to household marketing are seismic. Where these households will be located is also changing. Income inequality, the political lightning rod of recent elections, will continue to define the American consumer experience in 2026. According to the study, by 2026 American cities will be 10 percent more densely populated than they are today. Urban density for the top 50 metropolitan areas will reach 4,687 people per square mile, and 84 percent of all Americans will live in urban areas.1 To put this into perspective, 4,687 people per square mile is roughly equivalent to the entire population of California living in New Hampshire. 1 US Census Bureau, Population Reference Bureau; A.T. Kearney analysis America’s Next Commercial Revolution: Influence vs. Affluence 4 Of course, not all households will be well off financially. Income inequality, the political lightning rod of recent elections for both the right and left, will continue to define the American consumer experience in 2026, with an increasing share of available wealth flowing to the top 1 percent of US earners, while the gap between these earners and the bottom 90 percent continues to grow (see figure 4). Values versus value As figure 4 demonstrates, since 1998 the American economic landscape has been significantly reshaped. This is especially important in terms of its impact on how people relate to society, business, and each other. 1998 was also significant because it witnessed the births of the first members of Gen Z, a generation born into a world their grandparents could not have imagined. Gen Z, the largest age cohort in this country, was born into a society where more and more wealth was controlled by fewer and fewer Americans and where the majority of Americans had the potential to communicate with each other on the Internet and social networks. Finally, it is important to note that the Great Recession of 2007–2009 fell almost directly in the middle of Gen Z’s birth years (1998–2016) and that the values of the generation as a whole were shaped during the Recession and in its aftermath. As we have seen, Gen Z has demonstrated outsized influence, and not just because of its numbers. Thanks to the tools at their disposal, their ability to broadly influence the society around them has been reduced to the time it takes to click a “Send” button. As a result, their values are mirrored, to greater and lesser degrees, by other generations.
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