A Closer Look at The Pie
As Washington pols wrestle over who should or should not be taxed and how much of the pie should be redistributed to which economic tier, Ad Age has released a study that should give everyone in the mass market retail world pause.
The top 10% of U.S. households are responsible for nearly half of the country's purchasing power, leading Ad Age to conclude: "...it's time to abandon the idea of mass affluence." Going forward, "the wealthiest households will be the households with significant disposable income to spend."
Ad Age does not weigh in on the merits of the trend, but comments: "As the very rich become even richer, they amass greater purchasing power, creating an increasingly concentrated market for luxury goods and services as well as consumer goods overall."
The other 90% of consumers still have to dress their beds, clothe their children and put food on the table, of course. That 90%, according to Ad Age, are set to become increasingly less affluent.
As it happened, I read the Ad Age story the same day Dollar General reported its first-quarter results. The retailer's fastest growing pool of new customers, executives said, consists of households earning $70K and above, with the second fastest growing cohort of new customers coming from the $50K plus demographic.
Dollar General's core customer (under $50K) continues to be enormously stressed financially - to the point that a 15-cent price hike on an item can serve as a deal-breaker, the company's ceo told analysts.
Because of that, Dollar General during the quarter decided to sacrifice margin in order to hold down prices on 228 basic consumable items. Its profit still jumped 15%, but Wall Street didn't like the whole lower-margins strategy and sent the company's stock down 7%.
Think about that the next time somebody asks how come product has to be de-speced to the point of insanity.