The Economist noted in this week's issue that a private equity firm is going to purchase the Gymboree Corporation for $1.8 billion. If you have kids, you know about Gymboree, which sells children's clothes and operates centers where "where children can play noisy games on brightly coloured soft mats." Why would someone want to buy a business oriented toward children when the birth rate in America is so low? The answer comes from Peter Francese, former founder and publisher of American Demographics magazine (now folded into Advertising Age magazine), who is currently an independent consultant doing work for the advertising agency of Ogilvy & Mather (a firm that could have been a model for the highly popular "Mad Men" series).
The birth rate in America has dipped to its lowest point in at least a century. Young couples are putting off having babies because they doubt they can afford it.
But the chances are that they still want children. Once the economy improves, the people who put off parenthood will get down to it. Mr Francese projects that in 2014 there will be 4.4m births, a record high. “That’s a lot of demand for Gymboree’s products,” he says. What’s more, the women who give birth to these post-recession babies will be better educated than any previous generation of mothers, and slightly older too. Many will earn enough to splurge on pricey accoutrements for their offspring.
And don’t forget the grandparents. America’s overall population is expected to grow by less than 1% a year for the next few years, but the number of people aged 65 to 74 will grow at a rate of 5%. Boomer grandparents will spoil their children’s children as eagerly as they once spoiled themselves.
This is exactly what is meant by the saying that “demography plays” on Wall Street.
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