The argument that the middle class is in decline is not an unusual one. However, Business Insider has decided to up the ante in their doom saying and has announced that the American middle class is, in fact, dying.
Why? Well, they have an interesting reason. See, last week, Recode reported that Birchbox (the online cosmetics subscription service) was in talks with Wal-Mart about a potential sale. Combined with other purchases (the trendy online fashion brand Modcloth, Bonobos, and Moosejaw) Business Insider implies that there is a pattern to Wal-Mart’s new strategy. Essentially, they are looking into fashionable and hip clothing in comparison to their previous strategy of selling inexpensive and less trendy designs.
All of these recent purchases are of companies that sell clothing and products priced well upwards of Wal-Mart’s typical price point. According to Business Insider, this shows that the amount of money that Wal-Mart can make from middle class customers is dropping. Where previously they could make money off of extreme discounts now they are trying to make money off of an upper-middle-class or upper class customer.
Business Insider isn’t alone in this line of thinking, either. Zero Hedge recently discussed the same phenomenon, arguing that Amazon’s recent decision to offer Prime to low-income users shows that Amazon doesn’t consider it worthwhile to market to the middle class because there soon isn’t going to be much of one. Instead, it makes sense to either market to high-income users or low-income users, as the middle doesn’t have as much money to throw around any more.
However, it’s possible that there isn’t really anything to worry about. Just as targeting more higher-end users could mean that there are less people in the middle who can afford those products, it’s also possible that Wal-Mart has identified that a group of their customers might have the disposable income to afford higher prices and is trying to keep them shopping in their stores rather than at traditionally higher-end stores like Target or Macy’s. Such a move in marketing could signal exactly the opposite as what Business Insider fears.
What do you think? Is the middle class dead? Or is there even more opportunity than there used to be?