The great mass market is fading away

When even Wal-Mart is too pricey for American shoppers, you know something's up.
REUTERS/Carlos Barria
When even Wal-Mart is too pricey for American shoppers, you know something’s up.

The great mass market, which helped define American life over the past century and changed us from “citizens” to “consumers” may be at an end.

The culprit? Rising income inequality, which has left well-off Americans as the only group that’s willing to open its wallets these days. According to the Nielsen Co., which tracks consumer sentiment monthly, the overall willingness of consumers to spend has fallen about 7 percent over the last year.

But among Americans making more than $100,000 a year, the willingness to spend has jumped by 11 percent in just the last six months. Six-figure earners were the only slice of the American demographic more willing to spend money today than a year ago, according to Consumer Edge Research.

Need more evidence? Same-store sales, an important measure of retail strength, have dropped for eight straight quarters at Wal-Mart. Analysts speculate that its customers are shopping even farther down the retail chain, at dollar stores and cut-rate grocery markets like Aldi.

When even Wal-Mart is too pricey for American shoppers, you know something’s up.

For marketers, the question is whether to devote scarce resources to chasing penny-pinching shoppers, or focus attention on the high-income groups, which have more money but fewer members. The choice to compete on price is a tough one, because someone else can almost always decide to go lower. On the other hand, you might be able to make it up on volume. Henry Ford got rich a century ago by constantly cutting prices on his Model T and selling more of them every year.

Of course, Ford also recognized the other side of the buyer-seller relationship: The buyer has to have money. In 1914, Ford took the revolutionary step of offering his workers $5 a day, more than doubling their pay. With their new affluence, workers could afford to buy the cars they built, and other employers had to match Ford’s wages. (The Five-Dollar Day was also designed to reduce employee turnover, as the grinding monotony of Ford’s new assembly lines was driving away skilled workers.)

I don’t foresee any American employers offering to double their workers’ pay. So it’s likely that the companies poised for the greatest success will be those catering to affluent Americans. Not only will their products sell, they’ll have more leeway to raise prices without driving away bargain-conscious consumers.

It’s a change from America’s 20th Century perception of itself, nurtured by decades of advertising touting the good life available to all: new home, new car, shiny appliances, the latest gadgets.

When the economy recovers, perhaps the mass market will return in all its glory. But it may be that the Great Recession will spawn a generation of Americans that, like its 1930s forebears, has learned to squeeze a dollar until it hurts.

You can also learn about all our free newsletter options.

Comments (9)

  1. Submitted by Solly Johnson on 07/11/2011 - 06:14 am.

    It’s not a matter of low and middle income people being unwilling to spend, but the inability to spend. Jobs lost in the past few years averaged $20-25 per hour while those created average about $11. Obviously, a larger part of our society now simply has difficulty buying essentials.

  2. Submitted by Paul Udstrand on 07/11/2011 - 08:13 am.

    Yes, contrary to the myth of trickle down wealth disparity is actually bad for the economy.

  3. Submitted by Andrew Kearney on 07/11/2011 - 11:51 am.

    The great example in Minnesota is Northwest Airlines. When they broke the union they also broke something bigger-the middle class. That and actions like it are what have reduced our lifestyle. There are no Henry Ford’s anymore just overpaid MBA’s.

  4. Submitted by Marta Fahrenz on 07/11/2011 - 12:34 pm.

    Today’s median wage earner has less buying power than the median wage earner in the 1960s. CEO salaries are an embarrassment of excess, and the worker has no leverage. We’re just thankful (those of us who are still employed) that we have a job. Where’s the outrage? And where is the president who promised change, hope, and equity for the middle class?

  5. Submitted by Francis Ferrell on 07/11/2011 - 12:35 pm.

    Sorry folks, trickle-down economics don’t work and to quote an old country sage, “…You ain’t telling me anything new!!!…”. Here again the ‘haves’ try to prognosticate and tell us indigenous ‘have-nots’ what’s wrong with society and our economy!

    I suggest all of you ‘haves’ see the Oliver Stone “Wall Street” movies and then tell me what we ‘have-nots’ are doing wrong in today’s economic climate. It’s a sad state of affairs when legal greed, an over leveraged US Dollar, and political buffoonery &/or ignorance rule the day for an elite few.

    I never thought I’d see the day and would agree with keen economic observers that Wal-Mart was getting a bit pricey for my personal living style!

    It’s even more funny and ironic to read or hear ersatz cultural sages pontificate on what’s wrong with us “poor” have-not folks. Trying to maintain a semblance of propriety with living life with the basics–bread, work, and dignity–is becoming a chore in itself when the society around us is in such disarray.

    What else is new to say about an economy and society, on all levels, that has gone amok? Don’t tell me things are getting better and new jobs are created when they are not! Show me the jobs so I can work to provide for my family or put on the table! Then I might believe things are improving.

    And, don’t tell me that Wal Mart is getting to be a bit pricey for my lifestyle. That’s only adding injury to personal insult on a situation I am painfully aware of.

    Now, tell me something fresh and new so I can continue to be a positive person. If things are going to get better then tell me petrol costs are going to be $1.50 a gallon or lower so I can find a job and spend my hard earned money at “pricey” Wal-Mart!

  6. Submitted by craig furguson on 07/11/2011 - 01:41 pm.

    I’m solidly upper middle class and I’ve switched to Walmart. I slip Aldi and Savers goods into the house when the wife and the kids aren’t looking.

  7. Submitted by Mark Bundgaard on 07/11/2011 - 01:51 pm.

    You are on to something here John. Everybody talks about the middle class, but it really does not exist anymore, not as it was defined 25-50 years ago.

  8. Submitted by Bernice Vetsch on 07/11/2011 - 02:03 pm.

    A guest on C-Span this morning spouted a lot of right-wing propaganda — including the nonsense that importing clothing and other goods manufactured by American companies that moved their operations overseas where wages were barely above slavery level and worker or environmental protections nonexistent — was actually good for low-income American workers because it meant they could find necessary goods at lower prices at places by WalMart.

  9. Submitted by Neal Rovick on 07/11/2011 - 02:46 pm.

    When the US consumer and business owners decided they no longer wanted to pay the US-scale wages to make what was wanted, the decline began. If we don’t want to pay ourselves enough to support ourselves in the manner in which we expect, how can we expect a poorer world to support us?

    You get the economy you are willing to pay for. Somewhat later, you then get the economy you can afford. And finally, there is no choice left–you’re just poorer with many fewer options. That is where we are at.

Leave a Reply