Investing.com - The combined future spending power of children from Generation Alpha and their Millennial parents could represent a market opportunity to tap into for investors, according to analysts at UBS.
In a note to clients, the analysts flagged that roughly $83.5 trillion worth of wealth is estimated to be transferred over the next 20 to 25 years, underpinning the expenditures shelled out in particular by Generation Alpha, or Gen Alpha.
"Gen Alpha is likely to be the largest cohort during its lifetime, given falling birth rates, with India, Nigeria and China the top three birth nations for this generation," the analysts wrote.
"Their values, opinions and decisions may have a material influence on the economy for the majority of their lifetime."
The analysts added that the spending habits of Gen Alpha, or the cohort born between the early 2010s and mid-2020s, may likely center around three major themes: gamification, wellness and sustainable living.
"The Alpha consumer: A highly aware, digital eco-warrior who values wellbeing," the analysts wrote.
Almost six out of ten people in this generation have discovered new brands and are more likely to buy from brands featured in a game, they noted.
"Video games have been around for a long time, but Gen Alpha engages with them in entirely new ways, with [more than] 50% interacting with games outside of actual playtime through online content, for example, compared with 36% of Millennials," the analysts said.
"Games could, therefore, be a popular channel for engagement with up-and-coming Gen Alpha."
The UBS analysts said their research also indicated that Gen Alpha is concerned about its mental and physical wellbeing. This is partly due to this generation's parents being "materially more concerned about their children's diet" than parents of Generation Z, the cohort preceding Gen Alpha.
Indeed, Gen Alpha children have already begun to engage with beauty products four to five years prior to Gen Z, with the COVID-19 pandemic especially accelerating awareness of holistic wellness as a concept, the analysts said. They added that Gen Alpha shoppers are "aligned" with the wellness industry's key drivers like health eatings, beauty and physical activity.
Gen Alpha may perhaps be more aware of environmental worries, which could could gradually push them to pursue more ecofriendly behaviors, the UBS analysts said.
This could lead them to alter household spending patterns by influencing parents to make homes more sustainable and volunteering to protect or restore the environment, the analysts predicted.
"However, the alignment between values and purchase decisions is debatable, given the attractiveness of instant gratification and low price points," they flagged, citing the success of fast fashion names as an example.
Over 50 companies across a range of industries were highlighted by UBS as possibly exposed to these trends.
Among them, internet and gaming groups Bilibili (NASDAQ:BILI), Electronic Arts (NASDAQ:EA), Hasbro (NASDAQ:HAS), Mattel (NASDAQ:MAT), NetEase (NASDAQ:NTES), Schibsted and Take-Two Interactive (NASDAQ:TTWO) were all highlighted. Cosmetics giant L'Oreal, as well as peers Ulta Beauty (NASDAQ:ULTA) and ELF Beauty, were also named, along with Chinese electric carmaker BYD (SZ:002594), Zara-owner Inditex (BME:ITX), and semiconductor groups Arm Holdings (NASDAQ:ARM) and Qualcomm (NASDAQ:QCOM).