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No demographic cohort has garnered more attention from the media, companies, and Wall Street than the Millennials—that ever-transforming segment of the U.S. population born between 1980 and 2000, which now numbers around 75 million people. According to the Pew Research Center, Millennials surpassed Baby Boomers in 2016 to become the largest living generation in the U.S.
Characterizing this group is not easy. By various sources, Millennials are civic-minded, special, sheltered, narcissists, entitled, environmentally-engaged, idealist, technologists—the list goes on and on. They like to cook at home, or if they do eat out, they prefer fast-causal or quick-serve restaurants to traditional casual dining. They love, of course, organic foods. What about fast delivery of anything and everything? You bet. They don’t go to movie theaters; are apt to shop and price compare using various apps; are obsessed with lifestyles; are enthralled with fitness trackers; shun owning cars; and wouldn’t dream of venturing into a hardware store. They like to “share,” are so-called “digital natives” and prefer experiences to material goods. Finally, within this hierarchy, while love and marriage matter to Millennials, tying the knot can wait for this group: today, the median marriage age in the U.S. is 28 versus 23 in the 1970’s.
Given their numbers and far-ranging interests, there isn’t a segment of society or corner of business Millennials don’t touch or influence. But that said, we emphatically say “so what?” What generation in American history has not been different, reshaped the economy in some shape or form, and left its distinct footprint on society? Besides, there is a far more important cohort to business and the U.S. economy than the Millennials.
Investors take note: as much as the media and Fifth Avenue worship the Millennials, smart companies are focused on a larger, wealthier, and industry-defining cohort: the Perennials.
What’s a Perennial? As cogently defined by Gina Pell, who coined the term in 2016, Perennials are “ever-blooming, relevant people of all ages who live in the present time, know what’s happening in the world, stay current with technology, and have friends of all ages.” Perennials get “involved, stay curious, mentor others, are passionate, compassionate, creative, confident, collaborative, global minded risk takers who continue to push up against our growing edge and know how to hustle. We comprise an inclusive, enduring mind-set, not a divisive demographic.”1 The last clause—“not a divisive demographic”—is notably important. One of the key driving forces of the U.S. economy isn’t a defined generation or an aged-based cohort. Think all ages—or cross-generational—when you think Perennials. Think of a large swath of the population that is extremely active, and endowed with the financial wherewithal to move and drive various industries or sectors. It’s a combination of Baby Boomers, Generation X and Millennials, and even the Silent Generation, or those born before World War II (Exhibit 1).
As Gina notes, “relevance belongs to every age,” which means the behavioral tendencies of the Millennials— their wants, needs and desires—are more widespread than commonly realized and more in line with those of other generations.
Take Bob, for instance. He is 74 years old and a diehard rocker and innovator, whose favorite saying is that “I’ll sleep when I am dead.” When he is not tinkering with devices, Bob can be found at the nearest outdoor concert in Southern California, along with many other folks close in age. Bob was part of the epic Desert Trip last year, the week-long rock extravaganza that took in a cool $160 million. Bob paid over $400 for his ticket, as did many other Perennials, who have emerged as key drivers of the live entertainment business. Indeed, reflecting the growing market influence of the Perennials, 44% of those between the ages 51 and 70 are attending more live shows than they did in 2005, according to a study conducted by Harris Poll.2 Another Perennial is John Good enough. At the age of 94, John heads a team at the University of Texas at Austin working on cheap, lightweight and safe batteries that could revolutionize multiple industries. At the age of 57, John co-invented the lithium-ion battery, so he’s been here before. John’s endeavor speaks volumes about the correlation between aging and creativity—and the fact that innovation and creativity aren’t just for the young— they’re for the old as well. Indeed, a 2016 study from the Information Technology and Innovation Foundation found that inventors peak in their late 40’s and tend to be more productive in the latter half of their careers.3 To this point, the average inventor sends his or her research for patent at age 47, and the highest-value patents often come from the oldest inventors, or those over age 55.4 As Exhibit 2 highlights, those aged 46 to 60 receive the majority of patents each year.
Both John and Bob are part of the so-called “Silver Economy,” or the U.S. population aged 60 years or older. If you think this group is over the hill, think again. According to McKinsey, people over the age of 60 are expected to drive more than 45% of consumption growth in North America and nearly 60% in Western Europe, Japan and South Korea over the next 15 years.
Contrary to popular belief, the age group that purchases the most new vehicles or spends the most on vacations is not Millennials. Rather, as the saying goes, “gray is the new black.” It is the demographic cohort beyond the Millennials—populated largely by Perennials—that dominates and shapes U.S. consumer spending, which is all too evident from Exhibit 3. Pick any category—ranging from pets, to entertainment, to apparel—and it’s the Perennials among the Generation X, Baby Boomers and “Silvers” that dictate overall spending.
And what about purchasing goods or services online? Conventional wisdom would suggest that Millennials are driving online shopping. But reality is different. According to a report from KPMG, the folks between the ages of 50 and 70 spend more time online than Millennials. Boomers on average have a higher household income than Millennials—and they’re not afraid to spend it. Boomers outspend Millennials two-to-one on a per-capita basis in online purchases and, on average, people ages 50+ spend $7 billion per year online.5 As shown in Exhibit 4, Millennials do a great deal of online transactions, but lag significantly in the average amount spent per transaction.
Spending online is second nature to Maureen, age 52, and a registered nurse who has not been to a mall in over three years. Groceries, laundry, books, vacation, clothing—you name it—all are bought on her iPhone. She rarely turns on her television because she is a huge fan of Netflix. And as your typical Perennial, and being in the medical field, health and fitness are very important to Maureen, who bested her twenty-some-year-old children, Katie and John, in last year’s Chicago marathon. The kids could qualify as Perennials but when it comes to purchasing power and family financial decisions, it’s mom that pulls the trigger.
Sandra, age 54, is another Perennial who has always felt younger than the age on her birth certificate. She works full time as a real estate agent, keeps a dynamic social calendar, attends frequent philanthropic events with her husband and goes on regular late-night outings with her adult child. As a supplement to her day job, she maintains an active Uber-driving account, much like half of the Uber drivers who are over 40. Also not unlike many people her age, Sandra has confidence in the cosmetic surgical industry, as the older cohort has fueled spending in surgical and minimally-invasive procedures and has been increasingly more adventurous and trusting of procedures. A regular stop at her doctor’s office could include routine botox injections, soft tissue fillers, chemical peels (she’s an easy sell) or her once-annual face lift. Feeling safe under the scalpel and a participant in the $16.4 billion elective surgical or minimally invasive industry, 49% of cosmetic procedures take place in her age range, 40 to 54, according to the American Board of Medical Specialties. She may soon be a grandma but at all costs will be sure to give aging a good fight.
Finally there is Phil, age 62. Even after a bad back injury, Phil has no intention of retiring or passing on his housing contracting business to any of his three sons. They may share the same affinity for craft beer, scruffy beards and rehabilitated shiplap but Phil imagines working well into his 80’s. He believes he is in the prime of his career and networking at his age has never been easier, seeing as his fellow Perennials are the primary drivers of sales/earnings in the home repair industry. Because they have substantial home equity, are near or at peak-of-career-incomes, and account for the bulk of U.S. savings, Baby Boomers spent roughly three times more on home renovations than Millennial homeowners in 2016 (Exhibit 5).
So how big is the Perennial cohort made up of folks like Rob, John, Maureen, Sandra and Phil? After culling the data, examining urban/rural employment and income data, factoring in education and per capita incomes, and slicing up such cohorts as Millennials, Baby Boomers, Gen X and the Silent Generation, we conservatively estimate that U.S. Perennials number in the neighborhood of 110 million. That’s a rough estimate—it is most likely to be higher. But at 110 million6, Perennials outnumber Millennials by nearly 50%. What’s more, we estimate that Perennials have roughly $6 trillion in purchasing power versus $1 trillion for Millennials. As highlighted by Exhibit 6, U.S. Perennials rank as one of the largest economic cohorts in the world. By 2020, their nest egg is expected to total over $8 trillion as this cohort expands, hits career prime salaries, earns more and saves more, and witnesses a massive transfer of wealth from an aging generation.
It’s time for investors to take off the demographic blinders. It’s time to think cross-generationally. And it’s time to dig deeper and identify sectors and firms that provide goods and services not just to Millennials, the Boomers, or the “Silvers.” But also to firms that cater to the Perennials—the energetic, tech-savvy, wealthy crosssegment of the U.S. economy that is populated with consumers who are comfortable downloading movies on demand, banking on their smartphones, and dropping a few hundred bucks on a concert or experience.
Companies singularly focused on the Millennials are missing out on the real drivers of future earnings growth. In such sectors as retail and electronics, entertainment and travel, finance and transportation, more firms are beginning to adapt their goods and services to the tastes of the Perennials—or “ever-blooming, relevant people of all ages who live in the present time, know what’s happening in the world, stay current with technology, and have friends of all ages.” The firms with the most earnings potential are those catering to this intergenerational universe.
It’s the Perennials that will drive above-average growth in online banking, e-health, travel and leisure, fitness and athleisure wear, upscale casual dining, and social media and entertainment. By sector, technology, consumer discretionary, financials, and perhaps telecommunications will benefit the most from the Perennials. And what’s true for the U.S. is true overseas, notably in Europe and many emerging markets like India, China and Brazil, where a Perennial consumer segment is rapidly taking shape.
In the end, no demographic cohort is as potent as the Perennials. Yes, Millennials matter—but Perennials matter a whole lot more.
1 Gina Pell is considered Perennial #1 and is the Content Chief of The What.
2 “Hey Hey, My My: Aging Rock Fans Raise Lighters High”, New York Times, April 7, 2017.
3 “To Be a Genius, Think Like a 94-Year-Old”, New York Times, April 9, 2017.
5 Forrester research.
6 Global Wealth & Investment Management Chief Investment Office
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