retail news in context, analysis with attitude

by Kevin Coupe

Two interesting and somewhat interrelated stories this morning that caught my attention, and that I think are worth yours...

• The Washington Post this morning reports that numbers from the US Census Bureau suggest that continued shrinking of the American middle class.

According to the story, "The 60 percent of households earning between roughly $20,000 and $101,000 collectively earned 46.6 of all income, a 1.5 percent drop. In 1990, they shared over 50 percent of income.

"In contrast, the census data show, the top fifth rose 1.6 percent in 2011 after several years of decline during the recession. The biggest gains went to the top 5 percent, who earn more than $186,000; their share of income jumped almost 5 percent in a single year."

Tim Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin at Madison, tells the Post that "the working class, whose pay tops out about $62,000, are bearing the brunt of the income squeeze. 'Their pay rate has gone down, the number of hours that everyone in the house works has gone down, their homes have lost value,' he said. 'These are the people really ravaged by the recession'."

Which means, of course, that retailer and marketers that have traditionally catered to the middle class need to rethink that approach, and how they talk to a shrinking demographic segment.

• The Federal Deposit Insurance Corporation (FDIC) yesterday came out with a study saying that 8.2 percent of US households - or almost 10 million - do not have a bank account, up from 7.7%, or about 9 million households, in 2009.

The CNN story notes that these households - one-third of which report that they don;t have enough money to establish a banking relationship - increasingly turns "to alternative ways of getting cash -- like prepaid cards, payday loans, pawnshops and check-cashing services ... Minority, unemployed, young and lower-income households tend to be the least likely to have bank accounts. Compared to the 8.2% unbanked rate among all households, 21% of blacks are unbanked, as well as 22% of foreign-born non-citizens, nearly 23% of households with unemployed members and 28% of households earning less than $15,000."

And, the story says, "Altogether, more than one in four U.S. households, or 28.3%, are either unbanked or underbanked."

"Underbanked" is defined as people "who have bank accounts but who still use alternative ways of getting cash -- either because it's quicker to use an alternative or because they think bank accounts come with higher costs."

Which certainly explains why Walmart decided it needed to create a way to allow these people without banking relationships to order online and pay for their purchases at the store.

And it tells us something else about the continuing economic problems being felt by many Americans.

Eye-Openers, both.
KC's View: