The recession which started at the end of 2008 was different from almost all earlier downturns in that consumers at all income levels cut back spending dramatically. Both high-end stores and mid-range stores lost sales, while the low-end held up for the most part. This is different from most recessions where the middle gets killed, but the high-end and low-end do ok.
The reason for this is that many mid-range items are not materially more valuable than their low-end substitutes and people needing to cut expenses move to the low-end. Wal-Mart has been quoted as saying they expect many new customers gained in a recession to stay with them once the recession ends because new customers discover that Wal-Mart’s value price point really does offer value.
Products and services at the high-end generally don’t suffer in a recession because they offer unique value and their customers are less affected by most recessions. Such was not the case in late 2008 and much of 2009 when many people (at all income levels) were unclear how bad it might become, and therefore all cut back.
Several articles recently have suggested that the high-end is coming back, which suggests this recession (yes I know it is technically over, tell that to the 10%+ unemployed) is becoming more “normal” as fear of a catastrophe lessens. (I guess we could kill the high-end sales now by increasing the taxes on the rich since it is better to give their money to the government than let them spend it in the economy. Oops, this is not supposed to be a political blog.)
How are you dealing with making sure your products or services are not part of that “middle” that gets squeezed in all downturns?
Mitch
