America's changing retail landscape highlights our Brave, New, Unequal World

[Indy Texas]

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.

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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?

[Ban my account ffs!]

This really showcases just how much of a killer inequality has become.  Yet we'll likely only see it worsen for the foreseeable future.

[Blue3]

There's also online sales to account for (excluding restaurants of course).

[TheDeadFlagBlues]

If I wasn't on my tablet, I'd post scary graphs that show income inequality is only going to worsen as a social problem.

[Person Man]

Not to sound like a dick, but I will be breathing a bit easier this time next year when I get a full time offer that rivals my fiancé's new $70,000 a year plus $15,000 in benefits job at the University's hospital. In this neoliberal hellhole of country, you gotta be making $100,000 or perhaps $150,000 a year if you have kids to not be living on the shoulders.  Especially, if after the Macy's goes out of business, there's only the Walmart and Nordstrom that is left.

There's nothing wrong with playing the game and not necessarily being a fan of it, right?

[Cory]

Not to sound like a dick, but I will be breathing a bit easier this time next year when I get a full time offer that rivals my fiancé's new $70,000 a year plus $15,000 in benefits job at the University's hospital. In this neoliberal hellhole of country, you gotta be making $100,000 or perhaps $150,000 a year if you have kids to not be living on the shoulders.  Especially, if after the Macy's goes out of business, there's only the Walmart and Nordstrom that is left.

There's nothing wrong with playing the game and not necessarily being a fan of it, right?

I don't blame you? How could anyone? We all do what we have to.

[bullmoose88]

The Aztek killed Pontiac.

[Princess Nyan Cat]

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.

That's because WinXP works just fine and Macintosh products are crap.

[Oakvale]

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.

That's because WinXP works just fine and Macintosh products are crap.

Windows XP does work fine, but Macs are pretty great products IMO. I'm not a fanboy or whatever but spending the last few days wondering why "drivers" insist on not working on a Windows PC has strengthened my fondness for OSX immensely.

[bedstuy]

Putting aside the issues of income inequality, I would celebrate the death of JC Penny and Olive Garden.  Many of these middle market stores sell overpriced, ugly crap from China and gross microwaved food.  People would be better off buying less cheap clothing that looks like garbage and won't last, and more expensive, nice durable clothing.  People would be better off never eating at the Olive Garden and having a few nice dinners at actual Italian restaurants with fresh food. 

[Princess Nyan Cat]

Putting aside the issues of income inequality, I would celebrate the death of JC Penny and Olive Garden.  ... People would be better off never eating at the Olive Garden and having a few nice dinners at actual Italian restaurants with fresh food.  

Hey, no one insults Olive Garden! Man cannot live on bread alone, unless it's on Olive Garden breadsticks!

[Person Man]

Putting aside the issues of income inequality, I would celebrate the death of JC Penny and Olive Garden.  ... People would be better off never eating at the Olive Garden and having a few nice dinners at actual Italian restaurants with fresh food.  

Hey, no one insults Olive Garden! Man cannot live on bread alone, unless it's on Olive Garden breadsticks!

I gotta agree with this. 2 and 3 (or at least 2 and a half) star restaurants, hotels and department stores are still kinda nice. Its just that there's no one making $40,000 a year or many mas and pas making $70,000 together anymore.

[Randy Bobandy]

Olive Garden is a disgrace to Italian restaurants.

[True Federalist (진정한 연방 주의자)]

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.

The idea that JC Penney or Sears offered or offers good that in general were higher quality than Target or Kohl's is laughable.  What's hurt JC Penney and Sears most is that they moved into large malls.  Malls can be a hassle to get in and out of, especially at Christmas time.  Shoppers who go there are likely to browse the whole mall, which usually include plenty of stores that offer items similar to, or more fashionable than those at JCP or Sears.  By moving to the malls, JCP and Sears invited their customers to comparison shop.  Both stores would have done better had they stayed out of the large malls altogether so that when people went to Sears or JCP, they went to Sears or JCP rather than the mall.

[Southern Senator North Carolina Yankee]

I have a Windows Seven machine sitting behind me in a box and my brother has a computer with Vista. It is not for lack of access to newer stuff, that I elect to remain on an XP computer that by all rights should have been in a landfill by the time Obama took the oath.

[traininthedistance]

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.

The idea that JC Penney or Sears offered or offers good that in general were higher quality than Target or Kohl's is laughable.  What's hurt JC Penney and Sears most is that they moved into large malls.  Malls can be a hassle to get in and out of, especially at Christmas time.  Shoppers who go there are likely to browse the whole mall, which usually include plenty of stores that offer items similar to, or more fashionable than those at JCP or Sears.  By moving to the malls, JCP and Sears invited their customers to comparison shop.  Both stores would have done better had they stayed out of the large malls altogether so that when people went to Sears or JCP, they went to Sears or JCP rather than the mall.

I think what differentiated Sears was not necessarily the quality of their clothes or anything, but the effort put into a class of goods that you can't really get at Target or Kohl's: namely, appliances.  I feel like they were the middle-class place to go for washers and driers and refrigerators, with a well-regarded house brand and good service.

Also, they did a brisk catalog business way back before those discount big-boxes were a thing.  So their fall is, I'd agree, indicative of wider social trends.

JC Penney, eh, I'll agree they never had particularly great quality, if people are shopping at Target instead that's not really much if any of a downgrade.  And they've also been plagued by management missteps recently, from what I've heard.  I think the fall of mid-market retailers is definitely a thing (and the blame can be more-or-less equally divided between growing inequality and the "disruptive force" of buying things online), but JC Penney is a bad example of it.

[bedstuy]

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.

The idea that JC Penney or Sears offered or offers good that in general were higher quality than Target or Kohl's is laughable.  What's hurt JC Penney and Sears most is that they moved into large malls.  Malls can be a hassle to get in and out of, especially at Christmas time.  Shoppers who go there are likely to browse the whole mall, which usually include plenty of stores that offer items similar to, or more fashionable than those at JCP or Sears.  By moving to the malls, JCP and Sears invited their customers to comparison shop.  Both stores would have done better had they stayed out of the large malls altogether so that when people went to Sears or JCP, they went to Sears or JCP rather than the mall.

I think what differentiated Sears was not necessarily the quality of their clothes or anything, but the effort put into a class of goods that you can't really get at Target or Kohl's: namely, appliances.  I feel like they were the middle-class place to go for washers and driers and refrigerators, with a well-regarded house brand and good service.

Also, they did a brisk catalog business way back before those discount big-boxes were a thing.  So their fall is, I'd agree, indicative of wider social trends.

JC Penney, eh, I'll agree they never had particularly great quality, if people are shopping at Target instead that's not really much if a downgrade.  And they've also been plagued by management missteps recently, from what I've heard.  I think the fall of mid-market retailers is definitely a thing (and the blame can be more-or-less equally divided between growing inequality and the "disruptive force" of buying things online), but JC Penney is a bad example of it.

I could see JC Penney being replaced by a variety of smarter, better stores like H&M and Uniqlo.   I think Uniqlo is going to expand nationwide, at least to the major cities fairly soon.  Uniqlo is 15 times better clothing store than JC Penney and I think Uniqlo might actually be cheaper.

[Person Man]

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.

The idea that JC Penney or Sears offered or offers good that in general were higher quality than Target or Kohl's is laughable.  What's hurt JC Penney and Sears most is that they moved into large malls.  Malls can be a hassle to get in and out of, especially at Christmas time.  Shoppers who go there are likely to browse the whole mall, which usually include plenty of stores that offer items similar to, or more fashionable than those at JCP or Sears.  By moving to the malls, JCP and Sears invited their customers to comparison shop.  Both stores would have done better had they stayed out of the large malls altogether so that when people went to Sears or JCP, they went to Sears or JCP rather than the mall.

I think what differentiated Sears was not necessarily the quality of their clothes or anything, but the effort put into a class of goods that you can't really get at Target or Kohl's: namely, appliances.  I feel like they were the middle-class place to go for washers and driers and refrigerators, with a well-regarded house brand and good service.

Also, they did a brisk catalog business way back before those discount big-boxes were a thing.  So their fall is, I'd agree, indicative of wider social trends.

JC Penney, eh, I'll agree they never had particularly great quality, if people are shopping at Target instead that's not really much if a downgrade.  And they've also been plagued by management missteps recently, from what I've heard.  I think the fall of mid-market retailers is definitely a thing (and the blame can be more-or-less equally divided between growing inequality and the "disruptive force" of buying things online), but JC Penney is a bad example of it.

I could see JC Penney being replaced by a variety of smarter, better stores like H&M and Uniqlo.   I think Uniqlo is going to expand nationwide, at least to the major cities fairly soon.  Uniqlo is 15 times better clothing store than JC Penney and I think Uniqlo might actually be cheaper.

Where would American Apparrel fit?

[King]

I'm all about fixing inequality, but I feel the phenomenon in this article has more to do with changing tastes and foreign influence.  Japan automakers never did midrange, only luxury and standard.  I think that has taken hold in America, especially with the increased use of credit.

People don't want second best anymore. They'll either pay for something cheap in cash or take out the top of the line on credit. Apple is a good example of this. It's a luxury brand that everybody is paying extra for.  If they want to go cheap,  they go really cheap like Acer.  Nobody buys middle brands like HP anymore.

[Franknburger]

I'm all about fixing inequality, but I feel the phenomenon in this article has more to do with changing tastes and foreign influence.  Japan automakers never did midrange, only luxury and standard.  I think that has taken hold in America, especially with the increased use of credit.

People don't want second best anymore. They'll either pay for something cheap in cash or take out the top of the line on credit. Apple is a good example of this. It's a luxury brand that everybody is paying extra for.  If they want to go cheap,  they go really cheap like Acer.  Nobody buys middle brands like HP anymore.

The trend isn't unique to the US, but has for quite some time also been going on in Germany. Income differentiation plays a role, and periods of economic downturn have tended to speed-up the process, but, e.g., the polarisation of German food retail is a general, long-term trend:


This is signified by the success of discount food retail chains such as Lidl and ALDI ("Trader Joe's" in the US).  ALDI has some ten years ago begun to team up with EDEKA (Cooperative of independent food retailers, typically upper-priced and focusing on a large selection of delicacies), with ALDI and EDEKA shops being built next to each other.


Aside from EDEKA, other channels of convenience food retail, especially bakeries and petrol stations (night-time / holiday supply) have been growing as well. Food retail polarisation has already by the turn of the millennium started to affect traditional middle-of-the-road supermarkets, especially the Tengelmann group. Most of the traditional food retailers, including EDEKA, have in the meantime been building up their own discount chains and brands, while trying to move the traditional brand towards the upper market segment.

[DINGO Joe]

Sears Holding-which is Sears and Kmart is really all about a hedge fund guy named Eddie Lampert who gained control of Kmart during their bankruptcy in 2002 and then leveraged the real estate value of Kmart to essential buy Sears.  His master plan has always been focused on real estate value and not on successful retailing.  The collapse of the bubble did put a big wrench (Crasftsman no doubt)  in his plans.  It's too long of a story to recount here, google it if you want, but Sears/Kmart is more about greed than retailing.

[Nhoj]

Aldi exists in the US frankenburger, not just Trader Joes.

[Deus Naturae]

Yes, income inequality is growing and it can only be expected to increase. This is in large part the fault of government central planning institutions like the Fed, which have always functioned to serve the elites, but have done so especially as of late:

[True Federalist (진정한 연방 주의자)]

Aldi exists in the US frankenburger, not just Trader Joes.

  There are two related but separate Aldi's in Germany.  Trader Joe's is the US arm of one of them while the US Aldi is the arm of the other.

[DINGO Joe]

Yes, income inequality is growing and it can only be expected to increase. This is in large part the fault of government central planning institutions like the Fed, which have always functioned to serve the elites, but have done so especially as of late:

Of the stock listed, Macy's has been the best performer by far.  JCP was doing just fine until they hired the Apple guy, when it became apparent he was a disaster, it tanked.  Your thesis may have validity, but the Bloomberg chart is pretty arbitrary at best.