retail news in context, analysis with attitude

The Wall Street Journal has an interesting story about what Citigroup calls the “Consumer Hourglass Theory,”which posits that investors should “focus on companies best positioned to cater to the highest-income and lowest-income consumers.” The theory is that the ongoing recessionary mindset of the much of the American public and the apparent prosperity being enjoyed by the upper end of the socio-economic scale has helped to create a larger gap than ever between the haves and have-nots, forcing many marketers to adjust their their traditional approaches.

Case in point: Procter & Gamble, which generally has focused on “the vast American middle class” that sought mainstream branded products, is having to aim lower than it has traditionally.

According to the story, “P&G executives say many of its former middle-market shoppers are trading down to lower-priced goods - widening the pools of have and have-not consumers at the expense of the middle. That's forced P&G, which estimates it has at least one product in 98% of American households, to fundamentally change the way it develops and sells its goods. For the first time in 38 years, for example, the company launched a new dish soap in the U.S. at a bargain price.”

The story goes on: “P&G isn't the only company adjusting its business. A wide swath of American companies is convinced that the consumer market is bifurcating into high and low ends and eroding in the middle. They have begun to alter the way they research, develop and market their products.

“Food giant H.J. Heinz Co., for example, is developing more products at lower price ranges. Luxury retailer Saks Inc. is bolstering its high-end apparel and accessories because its wealthiest customers—not those drawn to entry-level items—are driving the chain's growth.”
KC's View:
There would seem to be little question that the space between haves and have-nots is widening, and that the middle is becoming a kind of marketing desert ... a hard place to grow new sales. Which means, I suppose, that companies that have been occupying the middle are going to have to consider their options ... because staying put sounds like an increasingly untenable position.