The warning that middle-of-the-road retailers would have to change or die was sounded as far back as 2003, in the marketing manual “Trading Up,” by Michael J. Silverstein and Neil Fiske. Because consumers had so much information and so many options, the authors explained, people were shifting their spending habits: they “traded down,” or saved money, on products when they cared only about getting the lowest price, and “traded up,” or paid more, for goods that were especially fashionable or functional.
That pattern has persisted through boom, bust, and feeble recovery. “It’s the segmentation of the American population that’s killing Sears and J. C. Penney—their inability to respond to the needs of heartland consumers, who remain a very rich force in the world of retail, who spend a lot of money and love to go shopping, still,” Silverstein, a senior partner and managing director at the Boston Consulting Group, told me.
So, where does the middle class shop today? According to Silverstein’s research, the middle quintile of American households—generally families with children, earning roughly seventy thousand dollars a year—stockpile household goods at Costco and purchase groceries at Trader Joe’s. Many have Amazon Prime memberships, which they wield strategically in cases where Amazon is the cheapest seller of a particular item. They browse for clothes at mall stores like Gap, but they buy only when the prices have been marked down at least once. At Target, they can trade down or up on the same shopping trip. Ubiquitous Macy’s coupons and T. J. Maxx’s designer discounts satisfy people’s desire to save money on quality products. Silverstein describes these customers as “heat-seeking missiles,” aggressively pursuing the best deals on a tight budget.