A generation of renters means less spending on lots more

It’s not exactly news that buying a house is increasingly unaffordable, especially in the major markets like Toronto and Vancouver. The same applies across the USA, where the financial struggles of the Millennials are compounded by massive debt from student loans, and where the inability to swing a home purchase is considered a massive redefinition of the American Dream.

“Since 2004, home ownership rates for people under 35 have dropped by 21 percent, easily outpacing the 15 percent fall among those 35 to 44,” writes Joel Kotkin in a February 4 article on The Daily Beast. Meanwhile, he notes, “the boomer rates remains largely unchanged.”

Even worse, rental itself can be close to unaffordable. “For workers between 22 and 34, rent costs now claim upward of 45 percent of income in Lo Angeles, San Francisco, New York and Miami,” Kotkin writes. The conclusion is bleak: “Like medieval serfs in pre-industrial Europe, America’s new generation, particularly in the alpha cities, seems increasingly destined to spend their lives paying off their overlords, and having little to show for it. No wonder that rather than strike out on their own, many millennials are simply failing to launch, with record numbers hunkering down in their parents’ homes. Since 2000, the numbers of people aged 18 to 34 living at home has shot up by over 5 million.”

Will it ever change? Some experts believe that, whether out of taste or necessity or a combination of both, renting is now seen as a perfectly acceptable, even desirable, way of living. Kotkin again: “Wall Street speculators like Blackstone are betting that the young are committed to some new ‘rentership society,’ with that firm investing $10 billion to scoop up existing small homes to rent, and even building tracks of homes exclusively for rent.”

If we stopped right there, we’d have a major trend that ought to worry marketers who have been counting on the traditional “life stage” consumer model to drive their strategies. Independence from parents, marriage, first home, first child – nothing is happening at the same age as it used to happen. Everything is falling later and later. Are age-related budget allocations being adjusted accordingly?

But there’s a deeper issue, as well. There are a host of home-related purchases that renters either do not make (renovations, decorating, gardening) or on which they spend considerably less money than home owners. This is another powerful reason for marketers to re-evaluate the distribution of their marketing dollars.

Using the Vividata 2016 Q2 Readership and Product Database, Zoomer U tracked some of the dramatic differences in home-related spending levels between Millennials and Zoomers.

First, as a benchmark:

  • 3% of Canadians overall are renters.
  • For Millenials, it’s 38.5% — an index of 152.
  • For Zoomers, it’s only 19.1%, an index of 75.
  • Although the size of the Zoomer (age 45+) population is almost double that of the Millennials – 15.8 million vs. 8.4 million – there are actually more Millennials renters (3.2 million) than Zoomer renters (3.0 million).

Intuitively, it makes sense that renters, usually with less space to work with, will spend less on home-related products. But let’s look at some actual numbers.

Furniture

  • 684,000 Zoomers spent between $2,000 and $5,000 on furniture in the past 12 months, compared to 289,000 Millennials. The Zoomers accounted for 55.2% of all Canadians who spent that much.
  • 260,000 Zoomers spent more than $5,000, compared to 143,000 Millennials. The Zoomers accounted for 50% of all Canadians who spent that much.
  • 370,000 Zoomers shopped for furniture 6 times or more in the past 12 months, compared to 156,000 Millennials. Zoomers accounted for 54% of all Canadians who shopped that often.

Accessories

  • 5,938,000 Zoomers purchased home accessories in the past 12 months, compared to 2,661,000 Millennials, The Zoomers accounted for 54.9% of all purchasers.
  • In all major sub-categories – bedding and bath, draperies/blinds, floor coverings and kitchen accessories – the number of Zoomer purchasers was at least double the number of Millennials, and accounted for at least 50% of all purchasers.
  • Zoomers significantly outspent Millennials. 1,320,000 Zoomers spent between $500 and $1,000 in the past 12 months, compared to 550,000 Millennials. And 630,000 Zoomers spent over $1,000, compared to only 379,000 Millennials. In both cases, Zoomers account for more than half of all purchasers in Canada.

Appliances

  • Zoomers rack up similar margins in most categories of major appliances (refrigerators, freezers, ovens, dishwashers, washing machines, dryers) and small appliances (everything from coffee makers and juicers to mixers and toaster ovens). In most cases, Zoomers also account for half of all purchasers.

Is the Zoomer margin due only to the issue of own-vs.-rent?

Other factors certainly come into play. The Zoomers outnumber the Millennials in the first place, so are likely to produce more buyers for almost any product category. As well, the Zoomers have higher incomes.

But the home ownership problem is likely to represent a serious drag on the spending power of Millennials across a number if important product categories. Going forward, marketers in those categories are likely to be paying more attention to how much business the Millennials can contribute – and where the sales really are.

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