“The gold is among the silver,” say some businessmen involved with an increasingly ageing society in the world’s most populous nation.
Xie Ziguang and Huang Zhongzhou are examples of the possibilities of this nascent “silver industry”, as more and more businesses wake up to just how much money can be made from customers like them.
Xie, 84, spends almost all of his monthly pension of 2,000 yuan (HK$2,270) to rent a single room in the serviced Futai Seniors Apartments in suburban Beijing’s Tongzhou district. He does this just so he can live independently and avoid having to live with his son’s family in a crowded home downtown.
Huang, who retired this year on his 60th birthday, begins his new jiazi, the circle of 60 years in the ancient Chinese calendar that marks the beginning of a new era.
The former owner of a machinery plant in Shantou, a city in the eastern province of Guangdong, is a big-spending senior citizen in an increasingly affluent country where the stereotype of the frugal grandparent is being eroded.
Huang goes to a suburban resort once or twice a month and travels to other parts of the country and overseas at least one or twice a year.
A tennis fan, he goes every year to watch one of the Grand Slam tournaments - Wimbledon in Britain or the Australian, French or US opens. He drives a BMW 5 Series and goes regularly to five-star hotels for dinner, luxuries he can afford with his handsome bonus from his majority share in the machinery company, which is being run by his two children.
Already a mechanical engineer, he is planning to take a university course, possibly towards a PhD.
For years, the common perception has been that the market of the young is the most lucrative, as parents spend all they can to spoil their “little emperors” - those born under the one-child policy introduced in the late 1970s.
But China’s changing demographics are forcing businesses to rethink their markets. Since the number of infants is rapidly decreasing, companies that deal in baby-related products and services are struggling.
In contrast, companies whose products are aimed at the elderly are booming.
“I spend money for a freer life and to eliminate my children’s obligation to take care of me, even though living together with them might save a lot of money,” Xie said.
Huang said: “Only when you’re retired do you have a chance to live your own life without bothering too much about your children.
“In fact, this is the best time to enjoy your life because ... your children have grown up.”
People such as Xie are becoming increasingly common, as millions of Chinese pensioners are accepting more the Western concept of the core family. While Huang represents a tiny market of rich retirees, experts said the market would grow steadily in the coming decades when today’s affluent middle class, born after the 1970s when the one-child policy was implemented, reach retirement age.
“The future retirees will see the erosion of current frugal consumption patterns by the elderly,” said Zhuang Jian, a senior economist with the Asian Development Bank’s China Resident Mission. Zhuang was referring to China’s baby boomers - those born before the implementation of the one-child policy - and those born under the one-child policy.
Research in 2007 by credit card company MasterCard resulted in a projection that consumer spending by baby boomers in countries such as China and other Asian nations will almost treble, from US$228 billion in 2005 to US$616 billion in 2015.
Beijing has put the affairs of the elderly at the heart of the country’s planning for economic and social development, and predicted that the elderly would spend one trillion yuan next year, making them a prime market to explore for domestic consumption-driven growth.
In a recent study, entitled “Embracing Change, Realising Dreams”, international publicity and business consultancy Ogilvy & Mather predicted that between 2025 and 2050, elderly consumers’ potential purchasing power is expected to be as high as five trillion yuan, which will make them a large part of the future national economy. The total annual income of this greying population - including pensions, part-time job remuneration and family cash gifts - was estimated at between 300 billion and 400 billion yuan.
The mainland has millions of mature spenders whose “silver” dollars are ready to be mined. The consuming power behind these numbers is whetting the appetite of marketers seeking to unleash the potential of this growing demographic segment. The Ogilvy & Mather report says brands that ignore China’s active seniors do so at their own peril.
“Mainland China’s over 100 million senior citizens [currently 169 million, according to latest government data], a group larger than the entire population of Russia, have been largely left out of mainstream marketing and communications,” said Kunal Sinha, executive director of Discovery and the author of the research report.
Discovery is Ogilvy & Mather Greater China’s consumer insights and trends unit, and is doing research on the ageing population.
Shenan Chuang, chief executive of Ogilvy & Mather Group China, says that as the per capita spending power of senior citizens is expected to rise from US$1,620 in 2005 to US$4,112 in 2015, it is imperative that companies understand what drives their needs, aspirations and, ultimately, their purchasing decisions.
“The lesson for us is evident: old people in China have changed faster than our beliefs about them,” Sinha said. “There is immense opportunity in the ways they lead their lives currently.”
Discovery’s report cited several broad areas - health care, tourism and leisure, financial services, science and technology, food and beverage, and retail purchases - in which products and services from an ageing population will be in high demand.
Against the common perception that seniors spend most on food and medical care, the study suggests different spending patterns. After food, daily necessities and paying utilities, their fourth-highest expenditure is telecoms - even more than medical bills - because keeping in touch with family and friends is vital to them.
“Eighty-five per cent of our respondents said they kept in touch with friends through e-mail; 68 per cent e-mailed their relatives, and 53 per cent e-mailed their children,” Sinha said. “The internet also enables them to have fun, and for the few who have the stomach or the spare cash to trade in stocks online.”
Health care products for the elderly were a fast growing market, said Chen Gong , a professor with Peking University’s Population Research Institute.
In his study, Chen found that an increasing number of elderly people used health care products in recent years. In Beijing, about 180,000 elderly people, or 13.7 per cent of the total elderly population of the capital, consumed such products regularly, while 210,000, or 16.7 per cent, used them occasionally.
“There exists great potential for elderly health care products and their future is bright,” Chen said.
Another burgeoning area is travel, and some tour operators have already seen a gold mine of opportunities. The Jinsefu Tourism Agency is one of the first in Beijing to make tourism for the elderly its core business. Product development manager Hu Shihai said his company, which shifted its focus to catering for the elderly nine years ago, had seen its revenue surge by at least 25 per cent each year.
Hu was optimistic about market prospects as the number of retirees whose financial means are stronger than ever before increases.
And for Beijing’s Wuzhou Women’s Hospital, the prospects for more cosmetic surgery looked even brighter. A doctor at the hospital said that the number of elderly women who underwent medical or surgical beauty treatments has surged dramatically in recent years.
“The most popular complaint is about wrinkles,” said the doctor, who declined to be named.
“I’ve asked some patients why they wanted to get rid of them. Most of them replied ‘for self-confidence’. More and more Chinese women will feel the same, I am sure.”
So far, the mainland’s “silver industry” remains largely untapped but is expected to take off in the years ahead as a result of changing consumption patterns by future retirees, said Zhang Wenfan , president of the China National Committee on Ageing. He added that targeting this demographic with products and services that contribute to their continued well-being just makes good sense if the world’s third-largest economy wants to keep growing.
“The sheer demand from an ever-growing ageing population should not be missed by businesses seeking to explore opportunities in an increasingly competitive society.”
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Firms wake up to spending power of the elderly
Cary Huang in Beijing
03 November 2009
“The gold is among the silver,” say some businessmen involved with an increasingly ageing society in the world’s most populous nation.
Xie Ziguang and Huang Zhongzhou are examples of the possibilities of this nascent “silver industry”, as more and more businesses wake up to just how much money can be made from customers like them.
Xie, 84, spends almost all of his monthly pension of 2,000 yuan (HK$2,270) to rent a single room in the serviced Futai Seniors Apartments in suburban Beijing’s Tongzhou district. He does this just so he can live independently and avoid having to live with his son’s family in a crowded home downtown.
Huang, who retired this year on his 60th birthday, begins his new jiazi, the circle of 60 years in the ancient Chinese calendar that marks the beginning of a new era.
The former owner of a machinery plant in Shantou, a city in the eastern province of Guangdong, is a big-spending senior citizen in an increasingly affluent country where the stereotype of the frugal grandparent is being eroded.
Huang goes to a suburban resort once or twice a month and travels to other parts of the country and overseas at least one or twice a year.
A tennis fan, he goes every year to watch one of the Grand Slam tournaments - Wimbledon in Britain or the Australian, French or US opens. He drives a BMW 5 Series and goes regularly to five-star hotels for dinner, luxuries he can afford with his handsome bonus from his majority share in the machinery company, which is being run by his two children.
Already a mechanical engineer, he is planning to take a university course, possibly towards a PhD.
For years, the common perception has been that the market of the young is the most lucrative, as parents spend all they can to spoil their “little emperors” - those born under the one-child policy introduced in the late 1970s.
But China’s changing demographics are forcing businesses to rethink their markets. Since the number of infants is rapidly decreasing, companies that deal in baby-related products and services are struggling.
In contrast, companies whose products are aimed at the elderly are booming.
“I spend money for a freer life and to eliminate my children’s obligation to take care of me, even though living together with them might save a lot of money,” Xie said.
Huang said: “Only when you’re retired do you have a chance to live your own life without bothering too much about your children.
“In fact, this is the best time to enjoy your life because ... your children have grown up.”
People such as Xie are becoming increasingly common, as millions of Chinese pensioners are accepting more the Western concept of the core family. While Huang represents a tiny market of rich retirees, experts said the market would grow steadily in the coming decades when today’s affluent middle class, born after the 1970s when the one-child policy was implemented, reach retirement age.
“The future retirees will see the erosion of current frugal consumption patterns by the elderly,” said Zhuang Jian, a senior economist with the Asian Development Bank’s China Resident Mission. Zhuang was referring to China’s baby boomers - those born before the implementation of the one-child policy - and those born under the one-child policy.
Research in 2007 by credit card company MasterCard resulted in a projection that consumer spending by baby boomers in countries such as China and other Asian nations will almost treble, from US$228 billion in 2005 to US$616 billion in 2015.
Beijing has put the affairs of the elderly at the heart of the country’s planning for economic and social development, and predicted that the elderly would spend one trillion yuan next year, making them a prime market to explore for domestic consumption-driven growth.
In a recent study, entitled “Embracing Change, Realising Dreams”, international publicity and business consultancy Ogilvy & Mather predicted that between 2025 and 2050, elderly consumers’ potential purchasing power is expected to be as high as five trillion yuan, which will make them a large part of the future national economy. The total annual income of this greying population - including pensions, part-time job remuneration and family cash gifts - was estimated at between 300 billion and 400 billion yuan.
The mainland has millions of mature spenders whose “silver” dollars are ready to be mined. The consuming power behind these numbers is whetting the appetite of marketers seeking to unleash the potential of this growing demographic segment. The Ogilvy & Mather report says brands that ignore China’s active seniors do so at their own peril.
“Mainland China’s over 100 million senior citizens [currently 169 million, according to latest government data], a group larger than the entire population of Russia, have been largely left out of mainstream marketing and communications,” said Kunal Sinha, executive director of Discovery and the author of the research report.
Discovery is Ogilvy & Mather Greater China’s consumer insights and trends unit, and is doing research on the ageing population.
Shenan Chuang, chief executive of Ogilvy & Mather Group China, says that as the per capita spending power of senior citizens is expected to rise from US$1,620 in 2005 to US$4,112 in 2015, it is imperative that companies understand what drives their needs, aspirations and, ultimately, their purchasing decisions.
“The lesson for us is evident: old people in China have changed faster than our beliefs about them,” Sinha said. “There is immense opportunity in the ways they lead their lives currently.”
Discovery’s report cited several broad areas - health care, tourism and leisure, financial services, science and technology, food and beverage, and retail purchases - in which products and services from an ageing population will be in high demand.
Against the common perception that seniors spend most on food and medical care, the study suggests different spending patterns. After food, daily necessities and paying utilities, their fourth-highest expenditure is telecoms - even more than medical bills - because keeping in touch with family and friends is vital to them.
“Eighty-five per cent of our respondents said they kept in touch with friends through e-mail; 68 per cent e-mailed their relatives, and 53 per cent e-mailed their children,” Sinha said. “The internet also enables them to have fun, and for the few who have the stomach or the spare cash to trade in stocks online.”
Health care products for the elderly were a fast growing market, said Chen Gong , a professor with Peking University’s Population Research Institute.
In his study, Chen found that an increasing number of elderly people used health care products in recent years. In Beijing, about 180,000 elderly people, or 13.7 per cent of the total elderly population of the capital, consumed such products regularly, while 210,000, or 16.7 per cent, used them occasionally.
“There exists great potential for elderly health care products and their future is bright,” Chen said.
Another burgeoning area is travel, and some tour operators have already seen a gold mine of opportunities. The Jinsefu Tourism Agency is one of the first in Beijing to make tourism for the elderly its core business. Product development manager Hu Shihai said his company, which shifted its focus to catering for the elderly nine years ago, had seen its revenue surge by at least 25 per cent each year.
Hu was optimistic about market prospects as the number of retirees whose financial means are stronger than ever before increases.
And for Beijing’s Wuzhou Women’s Hospital, the prospects for more cosmetic surgery looked even brighter. A doctor at the hospital said that the number of elderly women who underwent medical or surgical beauty treatments has surged dramatically in recent years.
“The most popular complaint is about wrinkles,” said the doctor, who declined to be named.
“I’ve asked some patients why they wanted to get rid of them. Most of them replied ‘for self-confidence’. More and more Chinese women will feel the same, I am sure.”
So far, the mainland’s “silver industry” remains largely untapped but is expected to take off in the years ahead as a result of changing consumption patterns by future retirees, said Zhang Wenfan , president of the China National Committee on Ageing. He added that targeting this demographic with products and services that contribute to their continued well-being just makes good sense if the world’s third-largest economy wants to keep growing.
“The sheer demand from an ever-growing ageing population should not be missed by businesses seeking to explore opportunities in an increasingly competitive society.”
Stephen Chen also contributed to the story
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