There are two middles in today’s economy, commonly though mistakenly coupled. The middle market is struggling; so is the middle class. These are related struggles, but not one in the same.
The U.S. middle class is under pressure as never before, largely precipitated by the Great Recession, yet long in coming. The eight days of near-doom in September 2008 struck like a lightning bolt, splitting the marketplace in two along an already-weakening fissure largely hidden from view until laid bare by a direct hit from the financial crisis.
In the three decade-long run-up to September 2008, stagnant real wages, accumulating debt and flagging innovation left the middle class imperiled and vulnerable to unforeseen reversals. The financial crisis was the proverbial straw.
A Pew survey last year found almost half of U.S. consumers saying they had “lost ground” during the Great Recession. An analysis of the 2009 TNS Global Economic Crisis survey classified a similar percentage as “financially fragile,” meaning that short of drastic measures they could not come up with $2,000 in 30 days to cover an unexpected emergency.
This abrupt bifurcation of the middle class left a yawning gap where an aspirational middle used to be. Millions of consumers have literally been taken out of the marketplace, now juggling tight household budgets with little to no disposable income for discretionary spending. This is not good news for middle market retailers and brands, but it’s not the main reason that these middle marketers are struggling.
The middle market was under pressure well before the financial crisis, due in no small part to the trading up ambition that catalyzed much of the frenzied, reckless spending that surged during the years just prior to the housing meltdown. Middle marketers lost their niche long before the downturn. The “hourglass economy” tag now refers to a split of consumer income into high and low, but a decade ago the very same tag referred to a split of consumer interest (and related things like retail concepts) into high and low. Both nuances reference the passing of the middle, but the decline of the middle market long antedates the distress of the middle class.
The elephant in the room is whether there is a future for a middle of either sort. Policy-makers and protestors are at loggerheads over issues of income inequality. Marketers are at loose ends over issues of sourcing growth.
Marketers must not pin their hopes for the future on a resurgent middle class or a resuscitated middle market. Better for brands to move past the middle. Indeed, success is being found now by brands with more of high-low approach. Strategies anchored by the middle, whether to trade up, trade more or trade higher, will cast brands adrift as this moorage continues to slip over time. For marketers, the growth imperative is to go high or low and not look for the middle to carry brands forward into the future.
Contributed to BSI by: J. Walker Smith, Executive Chairman, The Futures Company
Sponsored By: Brand Aid