Are the “Roaring 20’s” back? Yes, but not how you probably think.

There she is- the common image of the Roaring 20’s symbolized by the beautiful Mia Farrow.

An age of joy, abandon, unprecedented riches and living in the moment—until the moment fell apart in 1929.

There has been a lot of talk about this type of wild consumerism coming back post-Pandemic. And maybe it will. But not everyone will attend the wild party.

In 2021-22, the Roaring 20’s WILL dominate the retail scene. But not the era, the income group; the top 20% of earners has grown dramatically, while the bottom 20% struggles with necessities and paying bills.

Let’s take a look:

It is clear to see from the above that the top 20% has lots of wiggle room between their necessities expense and discretionary spending; however, if the bottom 20% wants to spend on something they don’t need, they have to dip into the pot that funds their necessities.

And this:

The combined wealth growth of the top 10% was $17.3 trillion; if we include the top 50%, it was $23.4 trillion. This compared to $1.2 trillion for the entire bottom 50%. So, in terms of wealth and discretionary spending, it will come from the top 20% plus the wannabes and aspirants from the top 50%. The HENRYs (High Earner, not rich yet- typically between $100 and $250K annual income).

So what does this portend for retail?

First, tremendous growth in the premium and luxury sectors. Not just the iconic brands, but the hundreds of new brands that have positioned themselves with the hope of joining the luxury fraternity.

Second, what has come to be known as the Bifurcation of Retail will become more exaggerated. The bottom 50% has to be concerned about price in everything they do; retailers that emphasize and are devoted to the price strategy like Walmart, TJX, Amazon will be their go to shopping destinations.

The top 50% will look for individualistic, higher quality product from the above iconic and emergent premium and luxury retailers.

What is missing here? The middle. Traditionally populated by “balanced” department stores. It looks like they are and will continue to find themselves irrelevant in both high- and low-end consumers retail plans.

Can the department stores reinvent themselves to be the true moderate middle again? To do so, will they give up the 25% because of this plus another 25% because of that and 25% more because we like you to fill their floors with quality, well-merchandised goods that represent fashion and quality at a moderate price point? Even if they want to, do they have the merchants who can do it? Back in the day, we NY department store buyers were good to great merchants who trekked to Paris and Tokyo, and knew what they wanted to buy or develop; the sales floors were not overcrowded or overassorted—they represented our statement of what we believed in. Sound familiar? This is the way Inditex (Zara biggest division) runs its business.

My word is not as good as the facts. Let’s take a look (the following two graphics are from the Deloitte Insights Report (2018). They are even worse (or better, depending on who you are) today:

      

      And this:

The Deloitte report was exposing something that had started to happen years before the Pandemic. We all know that the Pandemic served as the Grim Reaper for many retailers, most in that moderate middle.

Conclusively, the report said, “The great retail bifurcation is the apparent low-end and high-end retailers in accordance with the consumer’s economic situation and, more importantly, in accordance with a close understanding and response to what needs the consumer is expressing.” 

According to the same report (pre-Pandemic), the bifurcation represents an opportunity, a Renaissance, for retailers, big or small, apparel or any industry, who want to pay close attention to the evolving requirements of their target audience.

Such as ethics and sustainability- but that’s another subject. (Author’s note: this is the first in a series of articles about the luxury retail sector in 2021 and the future. Watch this space for more.)

© Michael Serwetz 2021