July 18, 2005
Boomers nearing retirement offer huge market potential
Businesses from leisure firms to financial institutions design products for older customers
Competition is heating up to get a piece of a potentially lucrative emerging market, created by Japanese baby boomers who are now approaching retirement age.
The total amount of retirement benefits the boomers are entitled to during the 2007-09 period may reach 50 trillion yen ($450 billion). Targeting this newly rich age bracket, financial institutions have started setting up new funds and offering new consulting services.
The hobby market for male boomers, including travel, education and entertainment, could jump 70% from the current level in and after 2007, when this cohort begins reaching retirement age, according to a Nikkei Marketing Journal estimate.
The boomers, defined as those born between 1947 and 1949, have been the most influential group of consumers for the past half-century. Their population is 6.76 million, or 20% more than the preceding age group and 26% more than the following. The boomers as a whole have become quite well-off, and their demand for consumption is strong, more robust than that of the age group 10 years senior.
According to an estimate by Dai-ichi Life Research Institute, boomers hold total financial assets worth 130 trillion yen, or nearly 10% of the nation's overall assets. "The group has a stronger propensity to consume than those in their 60s," said Takuma Hashimoto, an economist at the research entity.
H.I.S. Co., whose growth has been fueled by budget travel packages appealing primarily to the young, last month opened a specialized outlet called Ginza Vivalet in central Tokyo. The shop offers only tours that use business- or first-class seating on airplanes, and the staff arranges ocean cruises, transcontinental railway trips, stays at upscale hotels and other high-end packages targeting affluent older customers.
Just a five-minute walk from Ginza Vivalet is Royal Road Ginza, a high-end travel shop run by JTB Corp., Japan's leading travel agent. About 90% of the customers are in their 50s, and sales are projected to climb 15% year on year to 4 billion yen in the current fiscal year through March. The outlook is even more bullish for fiscal 2007, when sales are forecast to jump 20% as boomers begin to retire en masse.
"The first thing I will do with my retirement allowance is take my wife on an overseas trip to thank her for everything she has done for me," said Tatsuo Miyazaki, 57, a company employee in Tokyo whose only overseas trips have been for business.
When asked in the Nikkei survey to name the post-retirement activities they most look forward to, more than half of male boomers list domestic travel and about 40% cite overseas trips. Their fondness for intellectually stimulating, high-value-added trips makes this generation of men an especially lucrative target for the travel industry.
Staying fit
Many male boomers, especially those who already enjoy sports, are eager spend more time and money on staying active after they retire. The Nikkei survey shows that they plan to budget an average 252,000 yen per year on outdoor sports, up 80% from the current level, and 180,000 yen on exercise activities. The size of the hobby-related market created by 3.35 million male boomers is estimated to reach 5 trillion yen after 2007, up 70% from the current level.
Sports-equipment maker Descente Ltd. last fall opened the 42-hectare (100-acre) Whole Earth Forest in Nozawaonsen-mura in mountainous Nagano Prefecture, where the land is left virtually untouched to preserve the natural state of the woods. Forest camps are intended to foster more lovers of the outdoors, particularly among boomers.
Fitness club operators are also hopeful that retiring boomers will bolster their businesses. "Retired baby boomers will help boost the number of our members," said an official of Central Sports Co. The major fitness club chain plans to set up spacious facilities called Central Wellness Clubs that will focus on exercise programs for older Japanese and also offer education classes, opening them at a pace of three to five a year.
Megalos Plusia Tachikawa, a fitness club opened in April by Megalos Co., an affiliate of Nomura Real Estate Development Co., also hopes to attract more members in their 50s by offering a system under which physicians and instructors jointly draw up individual exercise plans for each member who signs up for the premium service.
Cultural curiosity
Berlitz Japan Inc. has seen one of its language courses gain popularity among boomers. This spring, Berlitz added six more classes in the Lifelong Learning course, which targets people 50 or older, bringing the total to 25.
The classes are taught at a slower pace and take more time reviewing lessons, which has appealed to older people who were interested in learning English but hesitant to attend an ordinary language school for fear that they might not be able to follow the pace.
An official at a pottery school operated by Shogakukan Production Co. said more than 40% of the students at a class in Tokyo's Ginza district are men around 60. "Only a fraction stop attending after signing up, and most stay here for a long time," an employee said.
Intellectual interests
Men of this generation have a broad range of intellectual interests. Those in their 50s or older make up 60% of another class offered by Shogakukan Production that concentrates on reading documents from the Edo era.
The boomers were famously dubbed the dankai no sedai (cluster generation) by Taichi Sakaiya, former minister of state for economic planning, in a 1976 book of the same title. He wrote, "The expansion represents an extremely unusual demographic trend, which usually show gradual changes. Therefore, the group has had a significant impact on the economy and society."
Sakaiya recently commented, "The group is important as consumers, and after retirement they can spend at their own will, freed from their obligation as corporate employees."
