The New York Times had an interesting article earlier this week in which it discussed the downturn of business for “midlevel” restaurants and retailers. Meanwhile, business is booming at higher-end destinations:
In Manhattan, the upscale clothing retailer Barneys will replace the bankrupt discounter Loehmann’s, whose Chelsea store closes in a few weeks. Across the country, Olive Garden and Red Lobster restaurants are struggling, while fine-dining chains like Capital Grille are thriving. And at General Electric, the increase in demand for high-end dishwashers and refrigerators dwarfs sales growth of mass-market models.“As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be,” Mr. Maxwell said. “You don’t want to be stuck in the middle.”
Sears and J. C. Penney, retailers whose wares are aimed squarely at middle-class Americans, are both in dire straits. Last month, Sears said it would shutter its flagship store on State Street in downtown Chicago, and J. C. Penney announced the closings of 33 stores and 2,000 layoffs.
With diners paying an average tab of $16.50 a person at Olive Garden, Mr. Glass said, “The customers are middle class. They’re not rich. They’re not poor.” With income growth stagnant and prices for necessities like health care and education on the rise, he said, “They are cutting back.” On the other hand, at the Capital Grille, an upscale Darden chain where the average check per person is about $71, spending is up by an average of 5 percent annually over the last three years.
LongHorn Steakhouse, another Darden chain, has been reworked to target a slightly more affluent crowd than Olive Garden, with décor intended to evoke a cattleman’s ranch instead of an Old West theme.
(An aside – I would put Longhorn Steakhouse in the same category as Red Lobster. Both are places we like to go to celebrate birthdays and holidays. The food is good, and they’re not “too expensive” to take the family to — coupon in hand, of course! And yes, they’re owned by the same company.)
The article’s slant strongly suggests that the middle class is disappearing entirely, and that’s why higher-end retailers and restaurants are thriving.
I read this though and thought something completely different — perhaps people are shopping smarter and getting better deals or experiences at higher-end retailers and restaurants. Are we waiting for purchases, then maximizing what we’re spending on something higher-tier that’s at a lower price?
Some of the comments by New York Times readers leaned in this direction too:
“I believe that we’ve finally reached that tipping point of oversupply and cheap consumption. Why buy something at Old Navy for $8.00 when I can buy something that uses materials and a production process that is vastly superior for $28.00?”
“Why buy “made in China” pants for $40.00 when if you wait, and are thrifty, you can buy “made in Italy” pants marked down from $220.00 to $70.00?”
“The point is, there are just too many options available today. While this article highlights the consumption of the top 1%, I do not consider myself part of that group, yet, I haven’t really slowed my spending all that much. I’m just fare more analytical about my purchases. Instead of buying a bunch of garbage, I just buy one really nice thing.“
“While price is relevant to me, I put quality far ahead of anything. At the beginning of this winter I purchased a $1600 wool coat marked down to $440 before tax (it was something from the past season) and classic navy blue. The cost would have been the same or slightly more than a similar item in the so called “middle class” stores, but yet I purchased an item with vastly better materials, fit and made by hand. There appears to be a growing segment of our economy like myself who have become hunters and somewhat of consumer opportunists.“
“I think another part of the puzzle is that the remaining middle class is more conscious of quality than it used to be. Many middle class people I know, from peers to aging members of my extended family, don’t want to pay $20/person for a chain-restaurant meal that isn’t very good. But they like splurging occasionally on a really nice experience. When they need a new refrigerator or washing machine, they’re willing to spend a bit more to get exactly what they want, since they’re already shelling out a ton of money for a piece of equipment they’ll likely be using for many years.”
“As a hospitality sector business owner I see ‘middle class’ people everyday who are looking for and willing to pay for great service and a quality product at a reasonable price point.”
“Well, we are middle class, and I have been spending some though on items that will last virtually a lifetime and beyond. Nifty stuff I have been “investing” in include: 1.) a Le Creuset dutch oven, which is great for nutritious and economical soups and stews and sauces; 2.) an antique sewing machine to make my own quality items… 3.) a warm down comforter so that we can turn down the heat even more at night; and 4.) cast iron pizza and biscuit pans. I have no desire to spend money on poorly made items nor clothing made mostly of synthetic fibers… I prefer to spend on quality, carefully.”
Do you agree? Have you stopped spending on “midlevel” items in order to wait for deals on those of better quality for around the same price?
mashupmom says
I think it’s also that the quality of the “mid-level” has gone down, as has the customer service and experience. Both Sears and Penney’s are mentioned in the article. Both used to have solidly constructed clothing at reasonable prices — now the fabric is noticeably thinner and cheaper, clothes don’t wear well, aren’t cut as well, and they’re just not as well made. People aren’t willing to pay “mid-level” prices for Walmart quality. If you’re going to position yourself as mid-level, you have to keep quality and service at that level.
At least in my area, both stores are cluttered, not well staffed, and visually unappealing — and Sears’ alignment with Kmart doesn’t help it any, nor did the whole Penney’s “we don’t need no coupons or sales” approach for a while.
Brandy4777 says
Sometimes you have to spend more and sometimes the things at the “mid-level” store are lower quality than the things at Target. If I can get a solid bookcase at Target for less than $100 then I’m not going to go spend twice than at another store for a lower quality piece.
On the other hand, if I’m looking for a rarely used item I might stop in to JCP, and I do go there quite a bit for my son’s clothes. At 14 he outgrown things far before he would wear them out.
NFriday says
Hi- One of the columnists in the Chicago Tribune had a column about this yesterday. He was mentioning that most of the arts organizations such as the CSO and the Lyric Opera don’t have last minute deals to entice middle class people to attend one of their performances. He also mentioned that the Rolling Stones can charge whatever they want for a concert, and people will find the money. He said some Rolling Stones tickets have gone for $900 a piece. He also mentioned that broadway shows that appear in Chicago, would rather move on to another city than reduce the prices on their tickets to keep the theater full. I think they assume that if they reduce the prices on some of the tickets, that people are going to hold out for bargains all the time.
I have noticed that there are very upscale restaurants in Chicago, that normally have no problem selling out the house, and I am talking about places like Alinea that has a 4 hour tasting dinner that they charge $250 a piece for. Apparently there are people that have dined there 30 times or more, and get preferential treatment when they visit the restaurant. This is the restaurant that is owned by Grant Achatz, that received national attention recently, because a couple decided to bring along their five month old kid, who started crying, and upset the rest of the customers. The tickets have to be purchased at least a month in advance, and are nonrefundable. The media said that their babysitter cancelled at the last moment, but Grant said that this was not true.