 |
 |
 |
 |
 |
 |
 |
 |
Shopping Centers Today -> February 2002
 PRINT THIS STORY: |
  CHANGE TEXT SIZE: |
WHERE’S THE BOOM?
As baby boomer income peaks, malls still waiting for windfall
By Debra Hazel
 |
The baby boomers — the largest generation in U.S. history — are now in their 40s and 50s, their peak income-earning years. But what ought to be a time of plenty for retailers, even in the midst of recession and war, is in fact a struggle.
The fly in the ointment for retailers is that they find themselves competing for boomer dollars with universities, the Internal Revenue Service and one another.
“It’s a very confusing milieu of events and trends,” observed Michael P. McCarty, senior vice president of research and corporate communications for Simon Property Group, Indianapolis. “I would not want to be a retailer right now.”
According to the 2000 U.S. census, boomers are doing quite well financially. The average income of households headed by someone 45 to 54 years old (the oldest boomers) was the highest of all age groups, at $73,100. The next-highest average income, totaling $67,000, fell to the 35 to 44 age group, the youngest boomers (see chart).
Historically, this affluence is not unusual. The boomers’ parents and grandparents were also in their peak earning years during their 40s and 50s. But, as always, the baby boom is a special case.
“The issue is that the boomers behave differently,” said Dougal Casey, managing director at research firm Clarion Partners, New York City. “The issue is that there are so many of them.”
There are more than 45 million households in the United States headed by a baby boomer.
“The boomers are the pig in the python,” McCarty said. “That’s what’s unusual.”
Boomers, like most consumers, are allocating fewer dollars to shopping centers, and among the causes is the cost of college tuition, which has risen at a rate far outstripping inflation. Fees at state schools have risen at comparable rates to those of private schools. Because many boomers married and had children at a later age than their parents, they will be paying these bills into their 50s and 60s.
Further, boomers have the additional worry of needing to save for retirement. But an even less obvious competitor is Uncle Sam and the tax system. While the average household income has risen by more than 50 percent between 1980 and 2000, the tax schedule has not been adjusted for the inflated salaries, thereby pushing more people into higher tax brackets.
“If the tax schedule is not adjusted for inflation, people will get hammered by the progressive tax system,” Casey observed.
These and other pressures weighing on baby boomers have become evident only in the past year or so, as the long-awaited economic downturn has started to take effect. Retailers may have been lulled into a false sense of security over the past 10 years, as boomers, encouraged by a bullish stock market, spent and spent and spent. But with the market in decline as their bills mount, something has to get squeezed.
 |
What money boomers are spending is being spread more thinly, observed Mark Zygmontowicz, executive vice president of Ann Arbor, Mich.-based retail consulting firm Thompson Associates.
“There are so many more places to spend money,” he said, and boomers are far more educated consumers than were their parents.
Add in the current uncertain economic and political situation, and retailers and their developer landlords have their work cut out for them. Retailers must be able to react rapidly to changing public moods, while developers are forced to make longer-term bets.
“One card that is dealt the developers is the long-term lease,” Simon’s McCarty observed. “A retailer can shift on a dime, but we have a seven- to 10-year lease.”
The issue is becoming increasingly critical as the generation ages. The oldest boomers will hit 64 in 2010.
“The challenge for the shopping center business is to figure out what people 45 to 64 want and need,” Clarion Partners’ Casey said.
That doesn’t leave much margin for error unless a company deliberately broadens the range of offerings at its centers. That is the tactic being taken by Phoenix-based Westcor Partners.
“We’re not trying to target any one demographic, as opposed to offering the latest, greatest, most productive stores,” said Frederick Collings, senior vice president, leasing for Westcor. “You kind of have to go after them all.”
But the temptation to populate a center with a little of everything can be a trap, some professionals warn.
“If you try to be all things to all people, you will fail,” McCarty advised, adding that the only successful center built on that model is Simon’s Mall of America. “You’ll end up with the sameness that turns people off.”
Some sectors are well placed to attract boomer dollars, and certain retailers have done a good job of luring them. Many boomers continue to spend their disposable dollars on their homes and at apparel stores such as Chico’s and J. Jill, which have managed to connect with the consumer, according to Julie C. Cameron, CMD, vice president of retailer productivity for General Growth Properties, Chicago. Talbots and other chains have shown substantial increases despite the current economy, largely by selling to this generation.
The rewards are potentially great, experts note.
“There are so many [boomers] that the sales at these stores are doing so well,” observed Cameron.
And that means that though they may be financially squeezed, they cannot be ignored, Cameron added. “At every conference I’ve been to in the last five years, they’ve said, ‘If you ignore this market, you’re crazy.’”
 | Current Issue November 2008 |