Counterparties: The hourglass economy
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Whatâs a retailer to do with a wideningÂ gapÂ between rich and poor customers?Â StarbucksÂ is the latest chain to target Americaâs âhourglass economy.â By cutting 10% off its grocery-store coffee bags while keeping in place the price hikes it put in place in its cafĂ©sÂ last year, Starbucks is simultaneously pushing both its discount and premium products.
Itâs a sensible strategy: low-wage occupations haveÂ dominatedÂ new jobs in the last few years, even as high-earnersÂ captured 121% of the income gainsÂ of the economic recovery. In 2011, the WSJ notedÂ Procter & Gamble’sÂ âhigh and lowâ approach to consumers by promoting its expensive Olay and Gillette products, while introducing a bargain dish soap for the first time in 38 years. The shrinking of the middle class ârequired us to think differently about our product portfolio and how to please the high-end and lower-end markets,” a P&G executive told the WSJ. “That’s frankly where a lot of the growth is happening.” Frito-Lay, Anheuser-Busch InBev, and ConAgra have also developed or expanded their offerings at both ends of their product lineups, according toÂ LEK Consulting.
This is a strategy recently-ousted JC Penney CEO Ron Johnson would have been wise to pay attention to, writesÂ Rita McGrath. Johnsonâs goal of turning the retailer into âBloomingdaleâs for the mass marketâ was a non-starter âbecause the mass market is gone.â
Which isnât to say this approach works for everyone. After trying to go high end with smoothies and salads,Â McDonaldâsÂ has now reverted to emphasizing its Dollar Menu more aggressively this year after promotions of its more expensive menu items failed to Â âresonat[e] with consumers,â in the words of CEO Don Thompson. âÂ Peter Rudegeair
On to todayâs links:
Warren Buffet on gold: bandwagon investors Â ”create their own truth â for a while” âÂ Ivan Hoff
Five reasons that might explain the yellow metal’s price collapse âÂ Matt Phillips
Elizabeth Warren’s statistically savvy dismantling of regulators’ $9.3 billion foreclosure settlement âÂ Lisa Pollock
More people doesn’t necessarily equal higher land prices âÂ Noah Smith
The terrifying, self-perpetuating reality of long-term unemployment âÂ Matthew OâBrien
“If youâve been out of work for more than six months, youâre essentially unemployable” âÂ Brad Plumer
Goldman Sachs may have just inadvertently strengthened the case for breaking up the big banks âÂ Simon Johnson
The full GS research report on the Brown-Vitter bill âÂ Hamilton Place Strategies
Already overpaid board members get a $75,000 pay raise âÂ DealBook
And, of course, there are many more links atÂ Counterparties.