One of the topics that has dominated the business news in India recently has been the spectacular decline in automobile sales. One of the reasons that our Finance Minister gave for this trend is that millennials are increasingly not buying cars. She received some flak on social media for this comment, but many also feel that she does indeed have a point.
A cursory read into the state of the US auto industry (one of the largest in the world) would show that this trend of declining sales has been visible for some time now. And many commentators are not hesitant in calling this a structural shift in the industry, driven by multiple factors, one of which is undoubtedly that people, especially so-called millennials, are indeed buying less of cars.
And this drop in consumption is not restricted to just automobiles. Real estate, apparel, music are just some of the other categories where people are moving away from asset ownership. This is a topic that I am interested in, and have been reading up on. Here are some of my personal observations:
People, especially the younger generation, but not necessarily restricted to them alone, are increasingly questioning the value in ownership of traditional ‘assets’ such as houses and cars. Some commentators believe that this is due, at least in some Western markets, to having experienced first-hand the troubles faced by their older generations in the aftermath of the 2008 financial crisis.
In addition, the rise of the ‘sharing’ economy has made it much easier for people to experience a similar lifestyle and benefits at a fraction of the cost of full ownership. This has led to consumers increasingly questioning the traditionally held concepts of value of asset ownership.
The rise and rise of digital and social media is also playing a role, in my opinion. I think we are beginning to see a reaction against the intrusion of digital into all aspects of our life. We are increasingly yearning for simplicity and a desire to reconnect, with each other and with nature. Witness the popularity of movements such as minimalism and personalities such as Marie Kondo with her message of decluttering.
The desire to reconnect with each other and with nature is leading to people valuing experiences. It is believed that since 1987 the share of consumer spending on live experiences and events relative to total U.S. consumer spending increased 70%. This can also be seen in the significant rise of Airbnb with its core concept of enabling authentic stays and experiences.
There is also a view that the younger generation are more concerned with the environment and in leading a more sustainable lifestyle, which again leads to questioning traditional consumption habits.
Is this still a fad, or the start of an irreversible trend? My opinion is that it’s the latter, but only time will tell.