Aging Boomers Could Spell Big Trouble for Walmart

AP

So where is the rub? It’s simple. When consumers hit about 50-years-old, according to the U.S. Bureau of Labor Statistics, their demand for stuff begins to subside. At 60-years-old, a person pretty much has just about everything he or she needs and then some. At 60, one’s body has stopped changing so one can wear clothes longer—a lot longer.

If you want to see what was fashionable 30 years ago, visit a Miami retirement community. The point here is that the bloom is off the rose of the Boomers’ consumption of things. The Boomer population is a huge bell shaped curve with many turning 65 at its leading edge (beginning in 2011) and with its very top cresting at 50-years-old in 2007 (1957 was the peak year for Boomer births at 4.3 million). All of this means that Wal-Mart needs to find a new market fast if it wants to continue doing business as usual.

But where does Walmart turn? The two U.S. generations over 65 do not have the critical mass to serve the company’s infrastructure, and besides, for the most part they have stopped consuming. The U.S. population now 26- to 45-years-old is a non-homogeneous combination of the small native born Generation X (nine million fewer than the Boomers) and the free-standing market of Latino immigrants. (Latinos are not evenly dispersed throughout the country but live in geographical pockets, primarily concentrated in about nine states).

So who’s left? It is Generation Y, the largest and most powerful generation of consumers this nation has ever seen. Will they be the solution to Walmart’s sales problems? No, not under Walmart’s current business model.

Walmart has lost its Sam Walton connection with the customer and the rest of the retail world has caught up. As if to prove that it is no longer in touch, Walmart recently announced a major restructuring of its sourcing, a move designed to increase the amount of generic Walmart brand goods on its shelves. This tactic could improve profitability with loyal existing customers, but will be a sure turn-off to the huge emerging brand-conscious Generation Y market.

Walmart has other issues that will play into their business success or failure. Walmart and China are joined at the hip. Despite popular belief, China’s economy is not healthy or stable. China’s one child-only policy has devastated its emerging labor force. By its own official estimation, China has prevented 400 million live births in the last 30 years. A smaller labor force in China eventually means higher labor costs and higher–much higher–product costs for Walmart.

Couple this with higher shipping costs, a falling U.S. dollar, a slowing U.S. economy and Walmart will have to find a new trading partner that can produce goods as cheap as China once did because China’s prices are going up. That trading partner doesn’t exist. India? We don’t think so. India has its own demographic problems and is not a ready substitute.

Oh yes, and one more thing. Generation Y is on track to become the greenest and most humanitarian generation in U.S. history. If one wants to do business with them, they had better be very green and very nice to their fellow man. And popular perception is that Walmart has a dismal record on both counts. Perception is reality. This fact could seriously injure Walmart’s business all by itself.

From 30,000 feet, our view of Wal-Mart is not very pretty.

More About Walmart:

• Walmart-Amazon Price War
• Slideshow: Inside the Retail Powerhouse

More About Boomers:

• Slideshow: Top Places for Boomers to Retire
• Quiz: Test Your Boomer Smarts

_________________________
Ken Gronbach is a nationally recognized expert and author in the field of Demography and Generational Marketing. He is a marketing guru who regularly provides counsel to large and small businesses across the U.S. Gronbach's book, "The Age Curve: How to Profit From the Coming Demographic Storm, was published in 2008.

Watch "Tom Brokaw Reports: Boomer$!", Thursday, March 4 at 9pm ET on CNBC. The program will also air Saturday, March 6 at 7pm ET; Sunday, March 7th at 9pm ET; and Monday, March 8th at 8pm ET.