From the Publisher: A country divided

The lingering recession has created a marketplace where some consumers want more and others cannot afford enough.

Two Americas? Yes, most definitely, two Americas. Perhaps as never before there is a SethNEW10-10gigantic difference between consumers, divided between those who have money and are willing to spend it and those who do not have the resources and cannot spend what they do not have.

As an article about the decline of the middle class in The New York Times last month describes, certain businesses, including a number of retailers, are doing great, while others struggle. The article uses the examples of fine-dining restaurant chains like the Capital Grille doing well while Olive Garden and Red Lobster struggle. General Electric, the article states, is selling its high-end dishwashers and refrigerators at robust rates, while its mass-market model sales are stagnant. Even the automotive industry is seeing this trend. Lexus and BMW dealerships, for instance, are touting strong sales while Ford and General Motors dealerships seem to be sweating out the trend.

And, with the exception of Walmart and, perhaps, Target, most mid-tiered and value-tiered retailers are faltering, while the high-end merchants post strong sales. Even dollar stores, long the last bastion of consumers looking for an ultimate deal or trying to make ends’ meet during tough economic times, are not raking in the dollars anymore.

All this adds up to the fact that the middle class is disappearing. Interestingly, consumers at the high end of the spectrum have more money and, maybe more importantly, a better outlook on the future than consumers at the lower end of the economic totem pole. The problem is that there seems to be a lot more people who view themselves as members of the latter group than the former one these days.

So where does that leave the grocery industry? Supermarkets are caught in the middle of this struggle and, surprisingly, it may be the safest place to be in the economic world. The bottom line is that consumers have to eat and less time at the local TGI Friday’s or Chili’s is more time at the food store trying to piece together a meal for the family. Less affluent shoppers will turn to the value-priced supermarket to help them keep food on the table. That means these supermarkets must fulfill their obligations to these consumers by offering a well-rounded array of quality products, across many price points.

At the same time, some grocery chains, eager for higher price points and more profits, are catering to more upscale shoppers, offering such high-end sections as imported cheese departments, wines and expensive take-home meals. In some cases, upscale supermarkets look more like gourmet food stores than mass retail grocery stores.

Offering consumers as many options as possible is vital to the future of the overall supermarket industry. It is going to be up to individual retailers to determine the status of their own marketplace and carry the right products—at the right price points—for their consumers. GHQ

Seth Mendelson can be reached at  646-274-3507, or smendelson@groceryheadquarters.com.

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