Recession Proof Markets- Best Choices Target Discretionary Income
March 16, 2009
Historically, one area that has always done well in recessions is targeting to groups that have discretionary income.
Most notably, these groups include young adults, empty nesters, and the super wealthy. The reason these groups are good customers is because their buying habits do not tend to change very much in bad economies.
Young adults will still be able to find part time and retail jobs that give them extra spending money. Many empty nesters have extra money left that they no longer have to spend for kid’s college funds or other costs. Although some may have suffered because of drops in their 401ks, many of these people have already moved their money from more risky stocks and moved it or had it sitting in bonds and money market funds. The result is they still have money to spend and a willingness to do so in certain areas. The other group is the super wealthy. This group’s buying habits don’t tend to change very much because their quality of life remains unchanged. However, if the economy worsens and goes into a depression, they are more likely to be affected than the other groups listed here. This is because they are the most likely to be tied into various business models where the bottom line hurts their income most with slumping sales.
So the question then turns to look at what items, services, and businesses each of these groups want. This can help give you some indication of what are potentially good stocks to invest in or show ideas on where you may want to start your own business. Ideally, you will want to target customers who have money to spend and a strong desire to do so on your product or service as this makes it much easier to make sales. Here, we will take a look at the 3 audiences and look at what they spend their money on.
Young Adults
Young adults tend to be the most technologically advanced and dress the coolest. The result is you will see them looking to buy technology related and clothing related items first. Common choices include: Video Games, MP3 Players, Cell Phones, Cool Clothes, etc. In addition, they are likely to spend a large quantity on fast food eating options. Because they are able to have some of their expenses covered by their parents, they will tend to be able to have a large degree of discretionary income dollars from their part time and retail jobs. The result is they will continue to spend their money on these various items as they are at too young an age to be concerned with saving money for retirement or a first home.
Empty Nesters
The Empty Nesters are those who have either no more children living in the home or are about to have their last child leave the home. Their life has been spent saving up money for retirement and college funds. They are now looking to enjoy some of rewards of their hard work throughout the years. They tend to be interested in socializing and will spend money on eating out more, going to sporting events, theater, dancing, etc. In addition, they have a greater emphasis on eating healthy and better health. Therefore, they will spend more grocery dollars on organic grocery stores and use more alternative medicine. They are also inclined to consider traveling and cruises. These can be to far reaching places like Australia and Europe or more localized. This group has a feeling that this is their last chance to enjoy the good life before they die or are physically no longer able to enjoy it. Their concern tends to be to satisfy this feeling allowing many businesses to flourish who cater to this niche. In addition, because the baby boomer generation is now becoming the empty nesters, the result is you have a large market of people to cater to.
Super Wealthy
The super wealthy is a small segment of our society who has managed to acquire a great deal of wealth. These multi millionaires can afford to continue to live their regular lifestyle because they have so much abundance. Common areas they are likely to spend money on include: Private Jets, Private Yachts, New Fancy Cars, etc. These groups are not afraid to spend money on the very best. You will also see them spending large amounts of money in hotels and resorts. They like the quality of these items and the status they bring.
By focusing your investing decisions on markets that have disposable income, you can do far better than other businesses during recessions. In addition, these businesses will continue to flourish even after recessions, which makes them solid customer niches to go after in any market
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