Footwear Insight

18 • Footwear Insight ~ July/August 2018 Soft in the Middle footwearinsight.com THE MIDDLE HAS ALWAYS BEEN A TOUGH PLACE TO BE and in fact it's getting more difficult to be middle-aged, in the middle class, in the mid-tier of retailing and in the mid- tier brand business. If you look at what's going on in this country, indeed globally, middle-class consumers are being squeezed — income taxes, real estate taxes, tuition bills, health care costs. Middle class consumers make enough to get by, not necessarily enough to get ahead. Upward mobility, always considered a big part of the American Dream, is tougher to accomplish. All the businesses that have thrived over the years by serving the middle class, like malls and department stores, are suffering, too. And indeed, most will not recover. Bon Ton Stores, Toys R Us, Radio Shack. All great middle-class stores. All gone. The action in retail mirrors the action in the economy. Right now, the high-end consumer is riding high and luxury and high-end retail has bounced back. There has been job growth and tax relief at the lower end of the pay scale and value and discount stores have benefitted. It has been fashionable to talk about a "retail apocalypse," but that's not an accurate description of what's taking place. A report by Deloitte titled "The Great Retail Bifurcation: Why the retail 'apocalypse' is really a renaissance," makes the point that social issues and consumers' changing attitudes towards finances are at the core of the recent upheaval in retail. There's good actionable data in this report. For example, 91 percent of all "retail" sales still take place in brick-and-mortar stores, which means that online shopping represents just nine percent of total retail sales. Although online shopping is projected to grow 11.7 percent, in-store sales are also projected to grow 1.7 percent — hardly the stuff of apocalypse, Deloitte analysts wrote. Instead, retail is changing in line with consumer income divides, meaning that high-end and budget retailers are seeing revenues soar, growing 81 percent and 37 percent, respectively, in the last five years, according to Deloitte, while mid-tier stores have seen only a two percent increase in sales in that same five-year period. There's another middle worth noting here: age. Many of the core brick-and-mortar shoppers, especially in the comfort channel, are middle-aged. If they are also middle-class, who have been shopping at mid-tier retailers, that is the triple whammy of middle-ness and that is not good. Indeed, many of these folks grew up shopping at malls and department stores and are aging out of those behaviors. These numbers are a road map for retailers. Go to where the money is. And now the money is at both ends of the market, not in the middle. The middle is not going away. But it's tough. Or as Paul Simon once sang: "Why am I soft in the middle? The rest of my life is so hard." O Mark Sullivan is a founding partner of Formula 4 Media. He has been covering the footwear industry since 1984. OPINION By Mark Sullivan WHAT RETAIL APOCALYPSE? Source: Deloitte 91% 9% 81% 37% of all "retail" sales still take place in brick-and-mortar stores of total retail sales are made online growth in revenue at high-end retail in the last five years growth in revenue at budget retail the last five years

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