Companies Gravitate Away From Middle Class

By Tony Chapelle
March 24, 2014

Corporate board directors and executives appear to be reacting to growing income inequality in America by abandoning the middle and focusing on either high- or low-end consumers. It’s a strategy that makes perfect sense to some governance experts, while troubling others.

With high earners driving more and more of the American economy, a barbell economy has emerged both on Wall Street and in shopping centers. Stock prices of luxury brands are soaring, as are those of discount brands. Yet mid-price providers are faltering. While more companies target either high-end or low-end consumers in their sectors, competitors who still concentrate on the middle class are being squeezed out.

Marcy Syms, a director at Rite Aid and Benco Dental, and previously chairman and CEO of publicly traded Syms, a now-defunct, off-price clothing chain, calls the barbell phenomenon a shame. “The [middle-class] consumer who knew and wanted what was being sold on Rodeo Drive and Fifth Avenue and was eager to find an affordable way to purchase a substitute no longer sees that as a viable way to shop,” she says. The clothing chain her father created and operated for 52 years grew to include 30 locations before going bankrupt in 2011. Still, Syms advises boards to pick a clear market position, even if it’s in the middle. “Being everything to everyone was never a good strategy, and today it is certain death,” she explains. On the other hand, she calls a complete transformation of the price selection at a company very risky and time consuming. “If you’re not Barney’s, don’t try to be Barney’s.” Syms recommends that managers identify and capitalize on the value that consumers think the current business has.

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