How the American middle class lost its taste for mindless consumerism

The lure of the deal isn’t what it used to be.
The lure of the deal isn’t what it used to be.
Image: Reuters/Andrew Kelly
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This Black Friday, middle-class Americans around the country will succumb to the lure of the deal. But in many ways Black Friday is a remnant of a bygone era. As recent news of Macy’s tumbling stock prices suggests, today’s middle-class shoppers are looking for more than a bargain.

Low prices used to be enough to entice middle-class families earning $45,000, $65,000, or maybe even $90,000 a year. Holiday sales and two-for-one specials successfully encouraged shoppers to buy goods not because they needed it, or even because they particularly wanted it, but in order to take advantage of a “one-time” offer. All-you-can-eat buffets, chain restaurants and fast-food value menus relied on the same principle.

Now these business models are tanking. Sears has suffered historic losses and shuttered its flagship Chicago store. J.C. Penney has closed 33 stores and laid off 2,000 employees in recent years. Red Lobster, spun off from its parent company and sold for a song, is bleeding money, slashing prices, and finding its customer traffic at historic lows. Olive Garden, too, has seen a decrease in customers for nine out of the last 13 years.

It’s no wonder these companies are caught in a downward spiral: they’re still relying on their old playbook.

The recession wasn’t just a wake up call for politicians and bankers. For the middle class, it also shattered the dream that fueled the deals—the idea that you could buy more stuff endlessly, without worrying about the future (or the debt you might incur in the process).

The financial crisis and its aftermath made middle-class Americans distrust mindless shopping. Instead, a new set of values emerged. More is no longer better. The middle class is more concerned with quality and experience.

A Sunday night out at a chain restaurant is still normal for the middle class. But the venue has changed from ones that deliver tasteless food for a low price to the new breed of fast-casual restaurants. For proof, just look at the profits churned out by chains like Chipotle, Freshii, and Shake Shack, which feature healthy, local, or exotic fare.

The same trend has shown up in retail, as consumers look to get a fashionable, well-made dress for a good price rather than dresses in abundance. That’s why T.J. Maxx is growing while J.C. Penny and Sears are in such trouble.

Starbucks was ahead of the game in adjusting to the changing tastes of the middle class. After a decline in sales in the mid-aughts, the company brainstormed ways to improve quality, shutting down all stores for three hours back in 2008 so baristas could learn how to make the perfect espresso. The closures cost the company a reported $6 million, but the improved customer experience has led to increased sales–more than enough to make back that one-time loss.

Ford has also shifted its approach in recent years. Rather than beginning its car-making process with engineers, it’s taken on rigorous study of different types of drivers and what each type wants out of their experience behind the wheel. Cruise control and lane assist make sense on the open, orderly roads of the American Midwest. Not so for drivers in central Mumbai, where lanes are unheard of and speeds rarely exceed 25 miles an hour.

For companies that have been slow to change, part of the problem is the extreme distance between the lives of corporate executives and the people they are trying to serve. Many executives are used to looking at the world through a spreadsheet, assuming that the middle class can easily be manipulated at the right price point.

But if stores like Macy’s want to regroup, they’re going to have to stop thinking about how to get customers to buy more stuff. A better question is how to give people what they actually want.