Demographic trends, such as falling fertility rates which has dramatically fallen in the Middle East, will impact consumer spending, according to a Deloitte report.
“The shrinking of a population in the Middle East consequently results in a similar diminishing of the labour 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,” he added.
According to a new report from Deloitte Touche Tohmatsu Limited (DTTL), Consumer 2020: Reading the signs, significant demographic challenges along with economic and technological forces will bring about unprecedented changes in consumer behavior.
The report, which was presented at the National Retail Federation in New York, 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.
For example, in the United Arab Emirates, the report said, 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 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 one per cent in the year 2000 to just fewer than 20 per cent by 2050.
“Over the coming decade we will see a rebalancing in the global economy, as countries that previously saw economic growth that was fuelled 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,” the report said.
This fundamental change in the structure of the global economy will shift the manner in which retailers and brands obtain growth. In the US 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.
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.