My refrigerator is fatigued. Soon, but hopefully not too soon, I’ll need to replace it. Will I be able to buy a modestly priced, well-built but not fancy refrigerator that will last the rest of my life?
I am not rich; I am not poor. I have a middling five-figure annual salary. I am parked firmly in the middle class. But, according to a New York Times story by Nelson D. Schwartz, American business is becoming less interested in selling to me and the rest of us mired in the middle — because the middle class is shrinking. Writes Schwartz:
As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.
GE, which manufactures big-ticket appliances, is not that interested in selling me a refrigerator. As the story notes, its Café line of refrigerators costs between $1,700 and $3,000. Of course, in those models you get options such as a “hot water dispenser for simplified hot food and drink preparation” and TwinChill™ “separate climates” in fresh food and freezer sections. I am insufficiently elite a market for Café class cooling. GE is happy because it makes more money selling higher-priced refrigerators at three grand than it does selling to me at one-sixth the price.
I’m willing to continue boiling water in a tea kettle instead of having the Café fridge disgorge it. I don’t have $3,099 to spend on a 29-cubic-foot French door refrigerator in stainless steel with such inane amenities. So, you tell me, I should head for Sears, like my Mom and Dad did 50 years ago, where I can buy a decent fridge for about $500. But these days, can I? Sayeth The Times:
Sears and J. C. Penney, retailers whose wares are aimed squarely at middle-class Americans, are both in dire straits. Last month, Sears said it would shutter its flagship store on State Street in downtown Chicago, and J. C. Penney announced the closings of 33 stores and 2,000 layoffs.
In some sectors of the economy, “from retailers and restaurants to hotels, casinos and even appliance makers,” notes Schwartz, businesses are abandoning the middle and racing for the top and the bottom.
In response to the upward shift in spending, PricewaterhouseCoopers clients like big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers.
This has risks, of course, for the companies who abandon a significant customer base and for the economy writ large. So far, the sharp rise in spending by the most affluent Americans is a principal driver of economic recovery. But can that last?
Those who have risen to the Promised Land of Plentiful Disposal Income are buying more, Schwartz writes: “In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.”
The sharp divide worries economist Steven Fazzari of Washington University, who fears the sharp divide in consumer bases may leave the economy overly volatile.
It’s going to be hard to maintain strong economic growth with such a large proportion of the population falling behind. We might be able to muddle along — but can we really recover?
Falling behind? How about being deserted by business and industry favoring the affluent (plenty of dough to spend) and the penny-pinchers (buyers of low-cost, low-quality, off-shored products sold in volume at high markup) to perpetuate the chase for a higher stock price?
Investors have taken notice of the shrinking middle. Shares of Sears and J. C. Penney have fallen more than 50 percent since the end of 2009, even as upper-end stores like Nordstrom and bargain-basement chains like Dollar Tree and Family Dollar Stores have more than doubled in value over the same period.
Well, dandy. But my concerns are not macroeconomic: If business and industry is focusing on the top and bottom ends of the economy, what are they actually delivering for the middle class and how? Are the products and services less or more credible or of high quality? Or is the middle getting what’s fastest and easiest to produce? (You know, “cheap.”) If American business is focusing more attention on the top and bottom, does than mean it is likely they are investing more money and know-how on those market segments? And less on the middle-class offerings?
So how can quality and quantity of goods favored by the masses in the middle be significantly improving? I sense a decline. More recalls? More frustrating calls to “customer service representatives” (and longer wait times)? Products that cannot be repaired (despite the pricey extended warranties) but only replaced? More plastic, less metal?
Remember F. W. Woolworth Company? Wasn’t it five-and-dime stores like Woolworth’s that created the model for the middle-class shopping experience more than a century ago? Its department stores offered American-made goods of quality at reasonable prices. Well, that era is gone. Dead. Finished.
Sears and J.C. Penney may beyond life support. Bricks and mortar have gone the way of Woolworth’s. Now we shop at Amazon and eBay where we can only gaze at images instead of feel the fabric, check the sizes, kick the tires.
It’s the new economy, stupid: There is more money to be made by selling to a small market segment which has oodles of money to spend, and more to be made by selling to a larger market segment, those at or near the poverty line who as a group spend more than the shrinking middle class. Will that leave a diminished diversity of poorly manufactured crap for those of us remaining in the middle to buy?
Ah, such is the American dream. Such is the ethos of American exceptionalism operating amorally in the marketplace.
I just hope I can replace my refrigerator some day and not have to make monthly calls to a CSR in the Philippines.