Global MeGatrends - local IMpactPublished by TReNd-MONiTOR July 2015

TReNd-MONiTOR insight/information/inspiration

CONTeNTs

GLOBAL MEGATRENDS, LOCAL IMPACT 2

MEGATREND#1 URBANISATION 3

MEGATREND#2 DIGITAL DISRUPTION 4

MEGATREND#3 THE AGEING POPULATION 5

MEGATREND#4 INDIVIDUALISM 7

MEGATREND#5 GLOBALISATION 8

MEGATREND#6 CLIMATE CHANGE 9

MEGATREND#7 THE SHARING ECONOMY 10

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TREND-MONITOR is an online resource for business professionals, delivering important and timely insights into trends which affect the home improvement industry

Owned and operated by J M Blake Associates, TREND-MONITOR is a membership-only website providing insight, intelligence and ultimately inspiration for buyers, marketeers, brand agencies, journalists, PR, business owners, investors and other stakeholders involved with home improvement product categories.

Combining a number of different resources including primary and secondary research, insight generation, data gathering, industry

events, consumer surveys, social media and interviews, TREND-MONITOR identifies emerging consumer, industry and macro trends, and assesses the impact these trends will have on home improvement product categories.

AbOuT TReNd-MONiTOR

Published by TREND-MONITOR July 2015.

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www.trend-monitor.co.ukTel: 0113 209 3288Email: hello@trend-monitor.co.uk

Trends are often thought of as lasting for a limited length of time, to gradually fade out without any lasting impact.

A megatrend is different.

Slow to form and global in their impact, their influence is far reaching and long term, with different meanings for different sectors of society. It is therefore vital for today’s business leaders to understand each megatrend, not only in isolation but also the connections between the different megatrends and the risks and opportunities they create for businesses and organisations.

For example, the way that Megatrend #4 Individualism has been fuelled by localisation which is a reaction to Megatrend#5 Globalisation and how this in turn has accelerated by Megatrend #2 Digital Disruption is as important as the single megatrends. Set this against a demographic megatrend such as the ageing population (Megatrend#3) and there are opportunities for forward-thinking businesses to develop products and services which enable older generations to adapt to this fast-moving world.

although megatrends are patterns or changes in activity which take place over a long period of time, the implications and effects are often short-term and can trigger a series of smaller trends within each sector.

They create potentially disruptive influences and challenges in terms of the way businesses operate and the requirements of their customers and stakeholders.

Being aware of megatrends can raise a number of difficult questions for organisations. Should we act differently? Can we move more quickly? Where do we put our capital? Can we change our target market?

Reacting to every trend and constantly changing course is not a viable long-term strategy, and the challenge for business leaders today is to find the space to analyse major global shifts, to look at the different opportunities they present and move their organisation to respond accordingly, at the same time as being resilient to a constantly fluctuating global landscape.

GlObAl MeGATReNds, lOCAl iMPACT

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Published by TREND-MONITOR July 2015.

According to the United Nations, in 2013 50% of the world’s population resided in cities. By 2030, they have estimated that 60% of the world’s population will be residing in cities.

Most of the urban growth will be in developing countries where it is predicted that the annual rate of change will be 2.3% in less developed regions, primarily in Asia and Africa, compared to only 0.5% in more developed regions.

This rapid urbanisation will create significant opportunities for social and economic development and more sustainable living, but will also exert pressure on infrastructure and resources, particularly energy.

With 1 billion people currently live in city slums, the UN has warned that this figure is likely to double by 2030 if insufficient action is taken to combat urban poverty. This creates one of the greatest challenges to governments around the globe in monitoring the process of urbanisation and managing growth sustainably whilst ensuring adequate access to housing, water and energy for all citizens.

To avoid the growing potential for social and political unrest caused by the negative social impacts of urbanisation, e.g. increased daily life costs, loss of family cohesiveness, homelessness, stress, social marginality, conflict and exploitation, governments have to address

the requirement for all types of social services, including mental healthcare, in order to create a healthy living environment and maintain traditional family structures and cultural values.

Despite some of the negative connotations of city living, there are also positive advantages in urbanisation. Cities are seen as places of opportunity and the long-term association between economic development and urbanisation is well documented. Even in less developed countries, current research has shown that the average household income is higher in cities and education levels are well above those in rural areas.

Urbanisation has caused a rapid growth in the number of mega-cities, cities with a population of 10 million or more. In 1950, there were only two mega-cities, New York and Tokyo. By 2005, this number had increased to 20. In 2015, there are now 36 mega-cities in existence. The largest of these are the metropolitan areas of Tokyo, Delhi, Seoul, Shanghai, Mumbai, Mexico City, Beijing, São Paulo, Jakarta, New York, Karachi, Osaka and Manila: each of these has a population in excess of 20 million inhabitants. Tokyo is the largest metropolitan area, while Shanghai is the largest city proper.

some Associated Macro-Trends

Economic: These mega-cities are now so large that businesses will increasingly regard them as centres for investment, and put the city in the central role rather than the mother nation.

Demographic and Social: Urban society is frequently associated with smaller families and the dispersion of the extended family. This has led to an increased diversity in living arrangements and a proliferation of non-traditional family units ie families without two parents and/or without children, and reflects an increased diversity in living arrangements for example single person households.

Environmental: Improving the environment and quality of life in our cities is a constant challenge and incorporating green infrastructure is one of the methods governments are using to combat the sea of concrete often found in urban areas. With increased support on an international level, green infrastructure offers a number of business opportunities for property owners in terms of cost and time savings, enhanced building performance and overall market advantage. See Trend Report: Green Building, 6 Key Trends from Ecobuild 2015

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1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

The urban and rural population of the world, 1950-2030

World, total population

World, urban population

World, rural population

Source: United Nations Dept of Economic and Social Affairs

MeGATReNd#1 uRbANisATiON

3Published by TREND-MONITOR July 2015.

Digital Disruption can be defined as the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services. Not since the industrial revolution of the 18th Century has there been such a rapid change in technology and the pace of this change is set to continue at an increased rate.

Enabled by the growth of social media, connected devices, mobiles, big data analysis, cloud computing, plus an increased expectation that information is instantly accessible, disruptors are exploiting digital tools and platforms to offer new value to customers.

A good example is the way Amazon and Netflix have disrupted the media and entertainment industries by changing how content is accessed by consumers. A change in consumer attitude has allowed these streaming models to tap into the importance placed on accessibility rather than ownership.

Digital was previously thought of as only being a threat to easily disruptable businesses such as music or newspapers.

now all areas of industry, functions and business processes, across all geographies, are in danger of being digitally disrupted, putting pressure on brands to embrace new technology or run the risk of becoming obsolete.

This has created two categories of business; those that have already been disrupted and reshaped by digital and those that have yet to be.

Digitisation is the future for business. It’s not enough to digitise sales and marketing functions with the use of social media. True digitisation is end-to-end, extending from the customer-facing functions through to back-office processes. If not, ultimately there will come a time when there is a disconnect in terms of efficiency, access to data and visibility, resulting in the type of errors rapidly becoming unacceptable in the new digital world.

With digitisation comes huge opportunities for companies to take advantage of connected devices and capture vast amounts of information, enter new markets, transform existing products, and introduce new service models. However the other side of the digital coin is the significant challenges it represents in terms of new competition, rapidly morphing business models, supply-chain transparency, privacy concerns and cyber threats.

Associated Macro-Trends

Innovation: Using digital platforms to crowdsource ideas from consumers, brands will increasingly engage with crowds to create new product ideas or tap into new markets. With the need for constant innovation, companies such as Starbucks, Dell, Lego and Unilever are looking outside of their internal teams to crowd-based communities to ensure a continuous stream of fresh ideas

Social: The static communities which existed within the workplace are changing as the baby-boomer generation starts to make its way out of the workforce. Their place is being taken by millennials who have grown up to be connected, collaborative and mobile via the many social media platforms. The traditional workday which involves commuting to an office and working 9 to 5 is no more, and progressive organisations are putting in place work environments which allow workers to work anywhere, anytime and on any device. Together with the current crowdsourcing technologies, which make it easy for businesses to tap into a vast network of freelances, this has created highly flexible virtual working communities which are available as required and on-demand rather than retained.

Economic: Digital technologies have increased the pace of automation in the workplace, which historically impacted mainly on blue-collar workers in repetitive, routine roles. Advancements in technology now enables roles which relied on intelligence and learning to be automated with increased computer processing power and sophisticated robotics. Although not entirely devastating to the job market, increased automation requires different education and training schemes, putting pressure on governments to develop and implement such schemes.

MeGATReNd#2 diGiTAl disRuPTiON

4Published by TREND-MONITOR July 2015.

The world’s population is ageing, mainly due to increased life expectancy, but also because women globally have had fewer children over the past 55 years, meaning that the proportion of older people is growing faster than the general population.

In 1950, there were 205 million persons aged 60 or over in the world. By 2012, the number of older persons had increased to almost 810 million. It is projected to more than double by 2050, reaching 2 billion, with the population aged 80 years or over growing faster than any younger age group within the older population.

Whilst the social and economic implications of this increase are extensive, it is also one of humanities greatest achievements, reflecting the enormous advances in health and overall quality of life in societies across the world. Improved nutrition, sanitation, medical advances, health care, education and economic well-being mean that life expectancy at birth is over 80 now in 33 countries, when as a little as 5 years ago, only 19 countries had reached this.

Globally, women form the majority of older persons and for every 100 women aged 60 or over worldwide, there are just 84 men.

For every 100 women aged 80 or over, there are only 61 men.

life expectancy 2011/12 2050 projection

Life expectancy at birth by sex

(men/women)

67.1 / 71.6 73.2 / 78.0

Life expectancy at 60 by sex

(men/women)

18.5 / 21.6 20.9 / 24.2

Life expectancy at 80 by sex

(men/women)

7.1 / 8.5 8.3 / 9.8

population

Number of people aged 60+ 809,742,889 2,031,337,100

Number of people aged 80+ 114,479,616 402,467,303

Number of people aged 100+ 316,600 3,224,400

Precentage of people aged 60+ 11.5 21.8

Precentage of people aged 80+ 1.6 4.3

Sex ratio: Number of men aged 60+

per 100 women aged 60+

83.7 86.4

Source: UNDESA, Population Division (2012). Prepared by the Population and Development Section on the basis of data from UNDESA, World Population Prospects: The 2010 Revision (New York, 2011), and UNDESA, World Population Ageing and Development 2012, Wall Chart (2012; forthcoming) www.unpopulation.org, and UNDESA, Population Division, World Population Ageing: Profiles of Ageing 2011 (New York, 2011), CD-ROM.

Ageing is happening fastest in the developing world. Currently, almost two in three people aged 60 or over live in developing countries, and this is expected to rise to nearly four in five by 2050 in the developing world. The differences between the ageing population in urban and rural areas is also marked, driven by the exodus of younger people as they search for work in cities.

MeGATReNd#3 The AGeiNG POPulATiON

5Published by TREND-MONITOR July 2015.

According to the Office of National Statistics, increases in the number of older people means that, by 2037, 13% of the UK population will be aged 75 and over.

the UK population as a whole is projected to increase by 9.6 million (15%) to an estimated 73.3 million in 2037. In comparison the number of people aged 75 and above is projected to almost double from 5 million to 9.5 million.

In 2012 life expectancy at birth in the UK was 79.0 for males and 82.7 years for females. By 2037 period life expectancy at birth is projected to reach 84.1 years for males and 87.3 years for females, an increase of around five years since 2012. As a result the average age of the UK population is projected to rise from 39.7 years in 2012 to 40.6 years in mid-2022 and 42.8 years by 2037.

Associated Macro-Trends

Economic: There can be an assumption that with an ageing population comes slower economic growth, yet as today’s elderly, particularly in the western world, are in better health, are better educated and are more affluent than previous generations, they are choosing to contribute to society well beyond the official retirement age. This is forcing attitudes to ageing and media portrayal of the elderly to change, as the opportunities in terms of what the over 65’s can do in their retirement are much broader, with things like travel, new experiences and learning being high on their list of expectations. Data from Saga suggests that businesses are actively looking at ways to keep people employed past their pension date, making it more attractive to stay in work. Their research indicates that the number of working pensioners has risen by a third since 2010, with many of them continuing to work because they enjoy it. An Age UK report showed that older workers are as productive and willing to work as flexibly as their younger counterparts.

Social: New housing models which combine high quality accommodation with friendship and support, are creating environments that enable the older generations to live well and independently for as long as possible.

Innovation: As the baby-boomers head towards retirement, there are huge opportunities for businesses who apply innovative thinking to the older generation, particularly in terms of smart devices which improve communication and well-being within elderly communities.

Design: Today’s older generations require products that are aspirational and suit their lifestyle, rather than ones which purely address issues such as the lack of mobility. Companies who work directly with the elderly to understand their aspirations, looking beyond their age and focusing on their experiences and the way they want to live, are designing products that address the problems associated with getting older at the same time as being aesthetically pleasing

MeGATReNd#3 The AGeiNG POPulATiON continued...

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Projected Population by Age-Group

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Year

2012 2017 2022 2027 2032 2037

0-1415-2930-4445-5960-7475 & over

Source: Office of National Statistics

Published by TREND-MONITOR July 2015.

Individualism refers to consumers’ increasing desire to be recognized as having ‘personal needs’ rather than being part of the ‘mass market’.

It is the growing freedom of choice expected by, and granted to, people within societies and communities, and promotes the interests of the individual rather than those of the state or a social group, as well as opposing external interference in one’s own interest by society or governments.

This increased respect for self-reliance, democracy and individual freedoms has developed a culture of ‘me first’, creating a more engaged, confident and vocal consumer, forcing companies and brands to re-assess the way they build relationships and interact with their customers.

Today’s demanding and sophisticated consumer increasingly welcomes personalised products and services in their desire to be treated as an individual, which leaves big brands vulnerable to smaller quirkier ‘unbrands’ who are agile enough to provide a bespoke offer.

being a big brand is becoming a definite disadvantage as consumers move away from safe, consistent brands in favour of seeking out the unique products and services that nobody else has.

The role of marketing has changed as communication between companies and their customers has become less about broadcasting mass-market messages and more about the pull of information from customers as a means of understanding their individual needs and requirements. As a result, companies who communicate directly with their customers rather than via a middle-man have a definite advantage as they are able to use this information to tailor products and services to the individual.

Associated Macro-Trends

Design and innovation: In a saturated consumer market, personalisation and customisation are benefiting producers looking to differentiate their offering. Brands are actively seeking out ways that allow their customers to personalise a product or service and make it bespoke to their individual needs and requirements.

Social: Living alone is an extension of individualism as society encourages self-reliance, and this has been influential in the rise of the single person household.

Economic: Reinforced by the changing nature of the workplace, individualism means that employees have expectations such as recognition, self-development and work-life balance which are often taking precedence over traditional factors such as pay and promotion. Rather than being treated as ‘one of the team’, employees require managers to treat them as individual people, to know their strengths and weaknesses and help them achieve their full potential.

MeGATReNd#4 iNdiViduAlisM

7Published by TREND-MONITOR July 2015.

Globalisation is the integration of economies, industries, markets, cultures and policy-making around the world and describes the process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation.

In the past, globalisation was primarily focussed on the economics of trade, investment and international capital flows. More recently the term globalisation has expanded to encompass the broader areas of culture, media, technology and environment.

The accelerated pace of technological change and increased inter-connectiveness have ensured that the growth of globalisation is rapid, fuelling fierce international competition and diversification, with emerging markets increasingly trading between themselves.

a shift in the global balance of power to the brIc nations has allowed the newly advanced economies of brazil, russia, India and china to become influential in the world market.

These nations are closely followed by what are being referred to the ‘MINT’ nations, comprising Mexico, Indonesia, Nigeria and Turkey; economically promising countries whose growth rates are outperforming those of the advanced world.

Interestingly, a feature of globalisation is localisation, where regional markets are flourishing and behaving in a more individual and distinctive way, coining the phrase ‘glocalisation. Increasingly, products and services are being developed and distributed globally, but also tailored to accommodate the user or consumer in a local market, conforming to local laws, customs or consumer preferences (See Megatrend #4 Individualism)

Associated Macro-Trends

Social: Improved economies in the developing world have led to a rapidly expanding global middle class, which in turn is a critical driver for economic growth due to the increased consumption of consumer goods by this sector of society. The social role of an increased middle class is equally important as they influence economic development through more active participation in the political process.

Consumer: Today’s consumer is no longer confined to the high street, they shop globally via their mobiles, tablets and laptops. Expectations have grown in terms of the number of different choices which can be made available from around the world and this is now causing consumers to become overwhelmed and confused by the amount of choice they are faced with. Forward-thinking businesses are counteracting this confusion by developing well-researched, smaller, niche product ranges with built-in customisation which are specifically targeted at precise market sectors.

MeGATReNd#5 GlObAlisATiON

8Published by TREND-MONITOR July 2015.

Climate change is a megatrend driven by three sub-trends; rising CO2 emissions, global warming and the loss of biodiversity. Whilst these sub-trends are global challenges in their own right, their combined impact is having a devastating effect, particularly on the more vulnerable areas of the world.

Rising CO2 emissions, the main cause of global warming, are increasing at the fastest rate for 30 years. According to a report by the Intergovernmental Panel for Climate Change (IPCC), much of this increase is from fossil fuel combustion in China and other rising economies during the production of goods for export, as America and Europe progressively outsource their carbon pollution to developing countries.

even small changes in the world’s climate have significant effects on the world’s biodiversity as species have evolved to live within certain temperature ranges and some are not able to adapt to new temperatures.

The climate and biodiversity changes seen to date; higher temperatures, changing rainfall patterns, rising sea levels, melting glaciers, extreme storms, flooding and droughts, major shifts in plant and animal ranges, have been the result of global warming of less than 1 degree Celsius since the late 19th Century.

With the IPCC predicting that by 2100 the surface of the Earth could warm by as much as 6 degrees Celsius if the current trend in burning fossil fuels continues, this potentially threatens approximately one quarter or more of all species on land. Ocean and fresh water species are equally at risk, especially those living in ecosystems that are highly sensitive to increases in temperature such as coral reefs.

The effects of climate change and weather events will be particularly severe for the world’s growing urban areas and, according to the

UN, the number of people in urban areas exposed to extreme weather events such as cyclonic winds, earthquakes and flooding will more than double in the first half of this century. This will result in significant economic costs and increased security challenges as the impact of climate change accelerates social unrest, particularly in more politically unstable areas of the world.

Associated Macro-Trends

Consumer: Recent trends in consumer purchasing habits have indicated that consumers, and in particular the Millennial generation, are becoming more and more interested in where a product is made, what it is made from and how it is manufactured. For some people ‘product provenance’ is as simple as knowing the country of origin, or about understanding the authenticity of the product make-up. For others it involves more complex issues such as whether the factory workers are being treated ethically or the impact on the environment. Whatever the motive, knowing where a product has been made (or grown), and its route to market, has taken on a new importance, increasing the requirement to make the supply chain more transparent.

Technology: Technologies exist now to tag products with a “chain of custody,” which enables buyers and sellers to track the provenance of their purchases. These technologies use the same platforms as FedEx shipment tracking for example, and track products using a series of barcode tags. The costs to implement such systems are dropping by the minute.

Design: The requirement for infrastructure to be climate-resilient is high on government agendas’, as existing buildings, bridges, roads and power stations are already vulnerable to some of the more extreme weather conditions currently being experienced. This has resulted in a fast growing market for building products that address the potential problems associated with climate change.

Economic: As well as identifying and assessing the risks of climate change, governments and key industry players are having to implement direct actions to manage the problem in the future in terms of policy instruments such as carbon taxes and emission trading schemes.

MeGATReNd#6 CliMATe ChANGe

9Published by TREND-MONITOR July 2015.

People have always shared the things that they own and now the digital sharing economy is allowing people to connect online and share with people they have never met before.

This sharing economy is changing the way people buy goods and services around the world, enabling the sharing and reuse of resources between people and organisations, including the creation, distribution, trade and consumption of any product or service.

The products and services vary in structure, from crowd-sourcing, peer-to-peer lending and time banks, to the consumption of ‘waste’ and shared space. The most popular sharing economy platforms in the UK include ride-share app Uber, peer-to-peer lending service Zopa, and Etsy, the marketplace for handmade goods.

these organisations are enabling people to explore new income streams, and according to accounting software company Intuit, 6% of working britons are now making money from the shared economy.

According to the Intuit report, this trend is part of the increasing shift among Britons towards self-employment, with the number of people working in this way now reaching almost five million. In fact, only 13% of ‘nine-to-five’ workers expect to be in such a role in 10 years time, instead desiring more control over their working patterns.

Population growth and increasing prosperity across the developed world is also driving the rise of the sharing economy. The greater strain on natural resources has caused a spike in cost and market volatility, triggering the search for more stable alternatives to traditional productions. The impact of social media and the

prevalence of cheap mobile phones have also made it easy for networks of people and organisations to transact directly, facilitating the influx of share-based business models.

James McClure, the UK boss of Airbnb, a home rentals website and one of the world’s most valuable start-ups, has dubbed the UK the ‘centre of the sharing economy’. Although over half of the ‘sharing’ start-ups are produced in the USA, London is the third biggest creator in the world, and the UK sector is set to grow from £500m to £9billion over the next decade.

The Government unveiled steps to put the UK at the forefront of the sharing economy in the latest budget, with initiatives to encourage Government staff and civil servants to use sharing economy solutions. This, along with the formation of the trading body, Sharing Economy UK (SEUK), which will represent and champion the UK sharing economy, has the potential to turn the UK into a nation of ‘micro-entrepreneurs’.

Associated Macro-Trends

Economic: The global sharing economy is growing rapidly, with many of the world’s most valuable start-ups emerging in this sector. People are exploring new revenue streams and supplementing their income by unlocking new levels of value in their excess resources. The increasing appreciation for self-employment, along with Government initiatives means the UK has all the tools to become the global home of sharing economy.

Consumer: Consumers are now able to save costs by borrowing and recycling goods. This provides people with access to goods who otherwise wouldn’t be able to afford them, or who have no interest in long-term use. People are also able to exchange less tangible assets such as time, space and skills, with no transaction of money.

Environmental: Sharing economy solutions combat the strain on natural resources, reducing negative environmental impacts such as carbon footprint and overall consumption of resources.

MeGATReNd#7 The shARiNG eCONOMy

10Published by TREND-MONITOR July 2015.