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What is Retail Bifurcation – and What Does it Mean for Retail Shopping Today?

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No one would dispute the fact that the retail sector has faced many obstacles over the past decade.  These changes are often attributed to rapid changes in consumer demand, and specifically, a shift from brick and mortar to more e-commerce platforms. It is assumed that because evolving technology is making it easier than ever to shop online, then that is where the blame lies. It is the Amazons of the world that are proving to be the ultimate demise of traditional retail stores.  And so every time a major chain disappears, or greatly reduces its presence, including retail icons like Toys “R” Us, Brookstone, Sears, and Kmart, online shopping is judged to be responsible. 

Online shopping may not be the only culprit

In any serious discussion on retail trends it would be foolish to ignore the rapid growth in online shopping.  Nevertheless, the fact is that today only around 10% of retail sales are conducted online - with 90% of shopping being done through brick and mortar channels. Even if the double digit growth predicted for online sales comes to fruition, the reality is that brick and mortar currently remains as the foundation of the retail world.      

So what is causing the apparent downfall of the retail market place?

In Alissa Quart’s new book, ‘Squeezed: Why Our Families Can’t Afford America,’ the author shares her insights and research on the disappearing middle class, writing, “Middle-class life is now 30% more expensive than it was 20 years ago. ” Quart cites the costs of housing, education, health care, and child care in particular. “In some cases,” she points out, “the cost of daily life over the last 20 years has doubled.”

Quart is not the only one voicing concern - as can be seen in the proliferation of articles on this topic.  For example, as recently as August 10, 2018, an article entitled ‘The Great Retail Bifurcation,’ notes that over the last decade, 40% of people in the United States representing the middle class, have seen their income shrink. 

The point raised by Quart and others continues to be emphasized in industry discussions: Consumers are pinched, and as a result, they are exercising greater discretion when making purchasing decisions.

The struggling middle class is changing the way it shops

This alarming news is one of the key underlying challenges facing the retail marketplace today. While online shopping is siphoning off some sales, specialty retailers are still attracting consumers at the high end and discount stores are efficiently serving the needs of shoppers at the lower end of the economic spectrum. However, the retailers who are most stressed are the ones who have attempted to build a customer base among the middle class.

The disappearing middle class is challenging many major American brands

As Quart reminds us, this same scenario is being played out across the country in both small towns and large cities.  That’s why when the Hershey Company reported flat sales in 2015, Hershey CEO John Bilbrey concentrated his comments on the growing distance between upper and lower income consumers and the shrinking middle class consumer. As he told Business Insider, “We think that consumer bifurcation has been an important driver."  Likewise, that same year, former Campbell Soup CEO Denise Morrison observed, "a shrinking middle class in developed markets is one of four seismic shifts that are impacting my company.”

As corporate CEOs and other retail leaders examine what’s impacting buyer shopping trends, they are zeroing in on the emerging economic landscape as one major reason for their downfall.

Retailers need to adapt to change

At Sobel &Co. we have endeavored to keep you updated on retail trends – ranging from drone deliveries, to online shopping, to robots in stores, to Apple’s self-checkout alternative experience – and we will continue to provide a focus on these and more going forward.

With each new blog or article, our goal is to keep you informed of the constant shifts in the retail environment.  We believe that as business owners and stakeholders, you must be armed with pertinent facts so that you are well-prepared, not only to respond to change, but to be thought leaders who encourage and foster change as well.  

If you have any questions about how these challenges will impact you, please contact us at Sobel & Co. at 973-994-9494 or by email at:

John.Mellage@SobelCoLLC.com and Chris.Martin@SobelCoLLC.com.

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