Retail Hits a Fork in the Road; Some Thoughts

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The retail economy appears to be bifurcating into affluent shoppers buying digitally and lower-income shoppers purchasing from low-cost bricks and mortar retailers. This split in consumption patterns will have an impact on how and whether we package as well as how we price, market and advertise.

It has long been my theory that bricks and mortar retailers, which focus on low-income shoppers, are best positioned to withstand the e-commerce onslaught. I base this on the fact that consuming via e-commerce requires two things that many low-income shoppers lack: A credit card and access to the Internet. Their only alternative is the local retail store.

It appears, however, that there is another reason why these low-price retailers are faring well at this particular moment in time: An increase in employment. Here is how CNBC writer, Lauren Thomas, puts it in her article, "This statistic is a key reason why Walmart, Target, and Costco are thriving while other retailers aren’t":

"…this one statistic could explain why Walmart, Target and America’s dollar stores are thriving, while department stores and specialty apparel chains aren’t. …The spending power of sticker-conscious shoppers is on the rise. Bank of America Merrill Lynch in a new research report said purchases made by low-income consumers ..grew 6% this past April from a year ago, outpacing both middle- and upper-income consumers’ spending growth across the country.

The article goes on to point out that these retailers stocks are soaring. Wal-Mart is up 12%, Dollar General is up 20% and Dollar Tree is up 11% this year.

Two things occur to me:

The retail economy appears to be bifurcating into affluent shoppers buying digitally and lower-income shoppers purchasing from low-cost bricks and mortar retailers. This split in consumption patterns will have an impact on how and whether we package as well as how we price, market and advertise.

The age of the discount store is very much still with us. Begun in the 1950s with names like Zayre, E.J. Korvette, and Ames,  it still thrives. It's only the names that have changed.

—– Article written by Richard Gottlieb, Global Toy Experts

2 thoughts

  1. Convenience is always available to low income shoppers if they set up a simple debit card and use the Internet…But big box stores still are strong and are determined to defend their turf”….I disagree that the Internet is not available to lower income people. The internet today is distributed well enough that all types of shoppers can use….Including apps on their smart phones…which are now even more prevalent.

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