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September 27, 2007

One person households: Opportunities for consumer goods companies

Analyst Insight by An Hodgson.

The rise in single person households worldwide is creating great business opportunities for a range of sectors, including providers of online communications, manufacturers of domestic electrical appliances and consumer electronics, the construction industry, and the entertainment industry.

Key points

  • The number of one-person households worldwide reached 202.6 million in 2006, up from 153.5 million in 1996;
  • The trend of single households is closely correlated to culture and living standards. As such, developing regions tend to have a considerably lower proportion of single households than developed regions;
  • Most single householders fall into one of the three categories: single young professionals who can afford their own place, middle-aged divorcees, and elderly people who tend to be on a tight budget;
  • The trend towards single households has contributed to fuelling a global housing boom. A range of industries, including the construction industry, real estate agents and financial services, can expect to grow as a result;
  • In the future, single households will be the most important consumer group not only because of their rapidly rising number but also because they are leading the way in changing consumer lifestyles.

Growth in one-person households

The number of one-person households has been on the increase worldwide. In 2006, the number of single households worldwide reached 202.6 million (up from 153.5 million in 1996), accounting for 11.8% of total households.

The trend of single person households is closely correlated to culture and living standards:

  • The proportion of single households is highest in developed countries. In 2006, one-person households accounted for 28.9% of all households in Western Europe, 26.7% in North America and 25.7% in Australasia;
  • In Eastern European countries, the socialist legacy with abundant housing and the modern trend of young professionals delaying marriage has also contributed to the relatively high proportion of one-person households. In 2006, 22.0% of all households in Eastern Europe were single households;
  • In developing regions where the traditional extended family structure is still prevalent or where low incomes and poor living standards prevent people from buying their own house, the proportion of one-person households is considerably lower. In 2006, only 3.1% of households in Africa and the Middle East were one-person households. For the same year, the proportion of single households in Asia Pacific was 7.6% and 7.8% in Latin America and the Caribbean.
Proportion of single households by region: 2006

Source: Euromonitor International from national statistics.

There are three main reasons for the rise in single households:

  • One of the primary reasons for the rapid increase in the number of one-person households is the trend of young people delaying marriage often in order to achieve career goals. This has led to the rise of young, wealthy one-person households particularly in large urban areas;
  • Other factors have been high levels of divorce and the breakdown of traditional family values and structures. These contributed to the rise in single divorcee households as well as single-parent households;
  • Population ageing has also led to a rising number of elderly people living alone. Previously, elderly widows or widowers who were on a tight budget used to make up the majority of one-person households especially in developed countries. However, with the rapid rise in the number of single young professionals, the typical one-person household is no longer occupied by an elderly widow or widower.

As single households are not a homogeneous group, it is important for consumer goods companies to understand the different segments of the single household consumer market in order to capture this market successfully.

Consumption patterns of single householders

Single households make up an important consumer market:

  • Single households still require the same quantity of household appliances as all other households. These household appliances include washing machines, refrigerators, televisions and hi-fi stereos;
  • Single households take up more space per capita as well as consume more energy and resources. According to a study of UK single households conducted in 2006, one-person households consume 38% more products, 42% more packaging, 55% more electricity and 61% more gas per capita than four-person households;
  • The larger per capita expenditure on household appliances and energy can lead to less disposable incomes and reduced purchasing power for the segments of single households comprising elderly people;
  • On the other hand, single households comprising young professionals can still have considerable purchasing power despite the larger running costs of the household. This is because this segment of the single household market tends to have steady sources of incomes and no family responsibilities.

Implications for businesses

Companies in a wide range of sectors are increasingly targeting the single household market, especially the segment of young professionals whose number is growing fast in both developed countries and fast-growing developing economies:

  • Single young professional households represent significant market potentials for the online communications market. Manufacturers of computer and communications equipment, Internet providers, and online social networks can expect to continue profiting from this growing segment of the single household market;
  • People living alone also have a higher demand for entertainment activities, thus creating an important market for the entertainment industry. Companies that can provide suitable indoor and outdoor activities can expect greater business and enhanced profits;
  • The rising number of single households enlarges the market for domestic electrical appliances and consumer electronics. In the UK, for example, driven by the growing number of single households, the retail volume of dishwashers has risen from 880,000 units to 1.2 million units and from 2.3 million to 3.0 million units for microwave ovens between 2001 and 2006;
  • The worldwide trend towards single households has fuelled the need to build new accommodation. In the UK, for example, three million new homes will be built by 2020 to accommodate the rising number of one-person households, which is estimated to reach 26 million by 2026 (from 23 million in 2007). The construction industry will be building more apartments for single people. On the back of this, real estate agents and financial services will also grow.
Households in the UK: 2006

Source: Euromonitor International from national statistics.

Nevertheless, in order to successfully capture this market, consumer goods companies need to better understand single-household shoppers:

  • Large value-packs can frustrate single household shoppers because they often contain unwanted portions that do not get used;
  • Companies need to understand this consumer group because single household shoppers are leading the way in changing consumer lifestyles towards a greater range of convenience products. In the food market, for example, single households increasingly demand products that are not only convenient but also healthy.

Future scenarios

Single households will be the fastest rising household group, which will be very influential in shaping future consumer lifestyles:

  • During 2008-2020, the number of single households worldwide will increase at an average rate of 1.6% per year compared to the average growth rate of 0.9% per year for the number of all households;
  • In absolute terms, by 2020 the number of one-person households is forecast to reach 253.8 million (from 202.6 million in 2006) and the proportion of one-person household is projected to rise to 13.0% (up from 11.8% in 2006);
  • In the future, in an effort to dampen housing demand as well as energy consumption, governments might consider the introduction of occupancy tax. Whilst this might help deal with housing shortages, it will effectively reduce the purchasing power of single households.

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