Middle-market brands and stores are
struggling while firms catering to both the extreme high and low ends of the economic spectrum have been thriving post-2008.
This isn't anything new. It's been building up for years, and the first "canary in the coalmine" was arguably when Chrysler killed off its Plymouth line, which had for years been a staple in blue-collar garages (along with GM's Pontiac, which met its own demise in 2010). Stores like JC Penney and Sears, which once epitomized Middle America, are on life support as money flows out the rafters up to Nordstrom and down the gutters to Target and Kohl's.
It has
consequences for innovation - if disposable income is concentrated in the hands of less than a fifth of the population, where is the incentive to develop this century's equivalent of the electric dishwasher or the personal computer?
We've seen this playing out, to a certain extent with technology. A third of Americans continue to use Windows XP, an operating system that is well over a decade old, while a $2,000 Macbook Pro is effectively out of reach for the typical American household budget. The average age of cars on the road continues to grow; since most Americans are now consigned to buying 5 year old "new to them" cars at CarMax, automotive innovation is disproportionately happening in boutique firms like Tesla that cater to ultra-high end clients.
It has consequences for investors. Firms that scream middle-market like JC Penney and Sears are bad long-term bets. But so might just about any industry built around large numbers of people spending "excess" money. Can commercial airlines manage to stay in operation if three quarters of the country can't afford to go on vacation? Can resorts like Disneyland remain profitable if only the top 20 percent of Americans can afford to go there and many of them are only having one or zero children?