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How the Modern Consumer is Different

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How the Modern Consumer is Different

How the Modern Consumer is Different

There is a prevailing wisdom that says the stereotypical American consumer can be defined by certain characteristics.

Based on what popular culture tells us, as well as years of experiences and data, we all have an idea of what the average consumer might look for in a house, car, restaurant, or shopping center.

But as circumstances change, so do consumer tastes – and according to a recent report by Deloitte, the modern consumer is becoming increasingly distinct from those of years past. For us to truly understand how these changes will affect the marketplace and our investments, we need to rethink and update our image of the modern consumer.

A Changing Consumer Base

In their analysis, Deloitte leans heavily on big picture demographic and economic factors to help in summarizing the three major ways in which consumers are changing.

Here are three ways the new consumer is different than in years past:

1. Increasingly Diverse
In terms of ethnicity, the Baby Boomers are 75% white, while the Millennial generation is 56% white. This diversity also transfers to other areas as well, such as sexual and gender identities.

Not surprisingly, future generations are expected to be even more heterogeneous – Gen Z, for example, identifies as being 49% non-white.

2. Under Greater Financial Pressure
Today’s consumers are more educated than ever before, but it’s come at a stiff price. In fact, the cost of education has increased by 65% between 2007 and 2017, and this has translated to a record-setting $1.5 trillion in student loans on the books.

Other costs have mounted as well, leaving the bottom 80% of consumers with effectively no increase in discretionary income over the last decade. To make matters worse, if you single out just the bottom 40% of earners, they actually have less discretionary income to spend than they did back in 2007.

3. Delaying Key Life Milestones
Getting married, having children, and buying a house all have one major thing in common: they can be expensive.

The average person under 35 years old has a 34% lower net worth than they would have had in the 1990s, making it harder to tackle typical adult milestones. In fact, the average couple today is marrying eight years later than they did in 1965, while the U.S. birthrate is at its lowest point in three decades. Meanwhile, homeownership for those aged 24-32 has dropped by 9% since 2005.

A New Landscape for Business?

The modern consumer base is more diverse, but also must deal with increased financial pressures and a delayed start in achieving traditional milestones of adulthood. These demographic and economic factors ultimately have a ripple effect down to businesses and investors.

How do these big picture changes impact your business or investments?

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Chart of the Week

A Visual History of the Largest Companies by Market Cap (1999-Today)

See how the world’s largest companies have changed over time, and how this helps tell a broader story about what the market is thinking.

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A Visual History of the Largest Companies by Market Cap

The macro narrative that underlies the market is constantly under revision.

While this is partially a function of shifts in investor sentiment, it’s also driven by game-changing events as well as much more structural market forces.

For example, how does the macro narrative change after a commodity price crash? What about when the unprecedented scale of technology is truly understood by the market?

An Evolving Narrative

In this week’s chart, we look at how the big picture narrative has changed over time by using a very simple approach.

We have visualized the market capitalizations of the 10 largest public companies in the world over five-year intervals from 1999 until today, and it gives us a series of snapshots of what the market was “thinking” during these specific periods.

Not only is it evident as certain industries rise to prominence, but there are also some interesting individual stories to follow. We can see iconic companies – such as Apple – ascend into the public consciousness, while others fall off the radar completely.

YearDescriptionTop CompanyWho Dominates Top 10?
1999Dotcom BubbleMicrosoft ($583B)Five tech companies in the mix
2004Post-BubbleGE ($319B)Diverse mix of companies by industry
2009Financial CrisisPetroChina ($367B)Six non-U.S. companies make list
2014$100 OilApple ($560B)Last year for oil companies, tech starts ascending
2019Big Tech EraMicrosoft ($1,050B)Seven companies are tech

The composition of the top 10 changes in each of the snapshots above, and this simple approach helps capture the market narrative for each timeframe.

During the Dotcom Bubble, you can see that half of the list was dominated by tech companies. This was short-lived, and the years 2004, 2009, and 2014 have much more diverse lists.

You can also see the impact of the financial crisis on U.S. company valuations. In 2009, there is an equal distribution of Chinese and American companies. Royal Dutch Shell (UK/Netherlands) and Petrobras (Brazil) help round out the top 10.

Finally, over the last five years, you can see the impact of lower oil prices and the growing scale of tech. Back in 2014, Exxon Mobil was the second largest company in the world by a solid margin, but today it’s been displaced by companies like Facebook, Amazon, Tencent, and Alibaba.

The Big Tech Era

Here is the current top 10 list of the world’s largest companies by market cap:

RankCompanyIndustryMarket Cap
#1🇺🇸 MicrosoftTech$1,050 billion
#2🇺🇸 AmazonTech$943 billion
#3🇺🇸 AppleTech$920 billion
#4🇺🇸 AlphabetTech$778 billion
#5🇺🇸 FacebookTech$546 billion
#6🇺🇸 Berkshire HathawayDiversified$507 billion
#7🇨🇳 AlibabaTech$435 billion
#8🇨🇳 TencentTech$431 billion
#9🇺🇸 VisaFinancial$379 billion
#10🇺🇸 Johnson & JohnsonConsumer Goods$376 billion

In total, the five biggest tech giants brought in a combined $801.5 billion in revenue last year, and $139 billion in net income.

The Staying Power of Microsoft

With a valuation today of just over $1 trillion, Microsoft is again the world’s largest company by market capitalization.

In this way, the above lists come full circle, since Microsoft was also the biggest company in 1999.

While the software giant experienced short periods where it did drop out of favor, Microsoft was the only company to make the list in our five snapshots above.

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Chart of the Week

The 10 Breakthrough Technologies That Will Define 2019

Which innovations will dominate headlines in 2019? According to Bill Gates, watch for these 10 breakthrough technologies to change the world.

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The 10 Breakthrough Technologies That Will Define 2019

Gone are the days of turning stones into spears. With the advent of new technologies, we’ve learned to develop tools that not only make living faster and easier every day, but also improve the future of humanity as a whole.

Today’s Chart of the Week draws from the MIT Technology Review, which features Bill Gates’ predictions for the top 10 breakthrough inventions that will capture headlines in 2019.

Top 10 Breakthrough Technologies

1. Gut Probe in a Pill
These swallowable devices can detect and potentially prevent diseases that cause malnutrition and stunted growth in millions of children worldwide.

2. Custom Cancer Vaccines
Personalized cancer vaccines, targeting only the cancerous cells and leave healthy cells alone, could help ensure faster recovery times and pose fewer risks to patients.

3. Meat-free Burgers
Plant-based and lab-grown food products will ideally alleviate the environmental impact of the livestock industry.

4. Smooth-talking AI assistants
The AI assistants of the future will have even more human-like conversations to personally engage customers. Companies would see measurable benefits, with just one breakthrough here garnering a 5% jump in productivity.

5. Sanitation without sewers
Improperly drained sewage causes death in one out of every nine children. Sanitation that doesn’t require sewers would not only prevent exposure diseases but also help turn waste into useful products like fertilizer.

6. ECG on your wrist
While most medical ECGS have up to 12 nodes to detect abnormalities, today’s wearables typically have only one. An ECG on the wrist would help reduce the risk of heart disease by monitoring changes and patterns in daily life.

7. Robot Dexterity
Advancements in robotics will enable the natural dexterity required to complete a greater range of tasks, such as helping an ailing loved one out of bed, doing the laundry, or building toys.

8. Predicting Preemies
Premature births are the leading cause of death for children under five years old. Tests to detect the possibility of a premature birth could be available in doctors’ offices in as little as five years.

9. Carbon Dioxide Catcher
Carbon dioxide catchers filter out CO₂ from the air and capture it for other uses. These include synthetic fuel creation, CO₂ for soft drinks, and plant growth in greenhouses.

10. New-wave Nuclear Power
Traditional nuclear reactors produce ~1,000 megawatts (MW), while these proposed mini-reactors would produce tens of megawatts ─ making them safer, more stable, and more financially viable for potential users.

A Vision for a Better Future

The biggest takeaway?

Seven of the 10 breakthrough technologies stem from the healthtech sector.

While several inventions on this list are years away from becoming a reality, they continue to embody the vision and passion that humans share to create and explore.

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