Middling and Mediocre (Craig Douglass On Consumers)

Prada store art installation near Marfa, Texas.

In elementary and secondary public schools, I was an average student. Pretty much Cs and an occasional B to surprise the parents. Nothing outstanding in the classroom. Extracurricular activities, however, were a different story. My assessment is A+. But that’s irrelevant to this discussion.

When it comes to consumers these days, average just won’t do. Middling or mediocre products and their corresponding brand equities, as well as the experience of retail shopping and spending, should be distinctive, memorable and provide exceptional value. If not, recent research shows, sales suffer. And this differentiation applies to online as well as bricks-and-mortar retail offerings.

Since the Great Recession, generally agreed as lasting from December 2007 to June 2009, middle-class wages have barely budged. Or, as a survey of 2,000 consumers by Deloitte Consulting LLC reports, “Incremental income generated since the recession has disproportionately gone to high-income households, with virtually all income growth between 2007 and 2015 going to the top 20 percent.”

Retailers, according to Deloitte and anecdotal evidence shared locally, have seen a measurable impact from this imbalance. It seems that sales growth has been bifurcated. That is to say, increases in sales have separated into two retail categories: high and low.

To be more respectful to discerning consumers, let’s describe these retail bookends this way: high-end could be status-conscious; low-end, cost-conscious. And the consumers and purveyors in the middle? How about mainstream-conscious. (Deloitte refers to these high-to-low categories as premier, balanced and price-based. We like ours better because consumers are keenly conscious about how they make purchasing decisions.)

What has happened is that the growth has been on the extreme ends of the retail spectrum, with those mainstream-conscious stores in the middle maintaining a recession-related status quo. Little to no sales growth.

During the past five years, revenue at status-conscious stores has seen an 81 percent increase. At cost-conscious stores, the five-year increase was 37 percent. And for the mainstream-conscious, the paltry increase over the past five years has been 2 percent. Goldilocks has not been good to the retailer offering just-right brands and a lackluster experience.

As the economy has improved, one would think the rising tide would have lifted all boats. Not so. The highest previous one-year revenue increase in the status-conscious brand category was 8 percent; cost-conscious, 7 percent; while mainstream-conscious has been moored at a negative 2 percent.

Retail expansion has also been viewed as somewhat surprising, as pundits have been lamenting the coming extinction of bricks-and-mortar stores, giving in to online preferences. (For our part, we have suggested that standing stores will not go away, but may become smaller, thus achieving a more effective cohabitation with their online brothers and sisters. We’ll see.)

The proof of expansion, without consideration of square-footage footprints, has been seen in the fact that cost-conscious retailers from 2015-17 opened 2.5 new stores for every one that the mainstream cohort closed. Status-conscious store openings offered a paradox to middling shutterings, cutting ribbons on one new store for every one that mainstream-conscious retailers closed. The actual store numbers for the period were 109 new stores for the status group, compared with 263 for the cost group, with the mainstream group closing 108 stores.

The current economy and lack of wage growth in the center show a “hollowing” of the middle class, some say, with retailers catering to this segment exhibiting a dearth of sales as a result.

What to do?

Well, consumers still relish an engaging and entertaining experience at retail. And they want to feel like they are receiving value for their choices. That value proposition is not just reserved for cost-conscious shoppers. All consumers, regardless of where they fall in our three-tiered income bracket, seek value, value as they choose to define it. Consequently, retailers at every level surely would want to determine what their target consumers perceive as value, and add it to product, price, promotion and place. For today, that exercise is critically needed in the middle-ground or mainstream-conscious segment of the market.

Middling and mediocre just won’t do.

Craig Douglass is an advertising agency owner, and marketing and research consultant. He is president of Craig Douglass Communications Inc. of Little Rock. Email him at Craig@CraigDouglass.com.