The Bottom Line: Retail and the survival of the middle class

I believe people are now looking for good values, not cheap stuff. I would like to think everyone is realizing that Wal-mart practice of paying the lowest wages is reflected in the quality of service their getting. Not to mention that Wal-mart's biggest supplier (China) is been in the news with really bad products, even dangerous.

I think people just don't care for Wal-Mart. "Having money to spend" is something most middle-class people aren't accustomed to. Many middle-class folks are trying to get by and save everything they can for retirement. There isn't really much "money to burn."

I refuse to shop at Wal-Mart. I am not interested in their prices, eventhough, I live below the poverty line. The little bit of money I can spend I want to try and help local economy and business.

...it's all a grand illusion anyway ...

If you work for an hourly wage, whether it is $6/hr or $600/hr you are working class...

something lost sight of in Madison Avenues push to get more money from more people.

the 'middle class' is the low end of the wealthy, not those that show up EVERY day to make ends meet.

I hope it's an indication people are moving away from Walmart..but probably not.

I wish everyone would get off Wal-Mart's back. Old man Walton made more millionaires out of secretaries and clerks through profit-sharing and stock ownership than any other employer. If Mom & Pop stores get axed, well, that's progress. Mom & Pop were charging $5 for what WMT charges $2.

You'll seldomly hear all this whining from any WMT employees; unless someone is destined for management, everyone knows that a job there is just a school job or stepping-stone. Why the hell don't I hear all this BS about Home Depot, Costco, or (ironically) Sam's Club?

WMT provides almost everything you need at a fair price. Stop whining and just don't shop there.

I hope you're right MMMM.

We bought all our clothes at Kohl's this year. I'm trying very hard not to shop at Wal-Mart. If you watch the sales, Kohl's can be just as inexpensive as Wal-Mart and the quality is far better.

You'll seldomly hear all this whining from any WMT employees

I've 'oftenly' heard walmart employees complain. My own principles would govern my distaste for them even if I hadn't.

Walmart's earnings were up for the quarter, but doesn't expect to meet projections for the year. I don't think that qualifies as "disappointing numbers."

Is Walmart facing some sort of middle-class exodus to Kohl's, Penney's and Target? Maybe. They tend to do more harm than good to themselves when they try too hard to chase more affluent customers. At the same time, they're facing tougher challenges from "bargain basement" competitors at the same time their costs are rising.

I think it's important to keep in mind that Walmart has nearly 3000 stores outside the US. Some Americans choose not to shop at Walmart on principle, others are discovering they can afford to shop elsewhere. But there are still plenty of potential customers for Walmart in the UK, Japan, Central and South America, China, etc.

The bottom line for me? Fluctuations in consumption by middle class Americans has very little impact on Walmart's numbers.

John: Costco pays a living wage, offers excellent benefits, and treats its employees with respect in most cases. They even reimburse for college and pay the difference between an employees salary and their military pay when they are called up for the war. That's a bid difference from what WalMart does.

"Old man Walton made more millionaires out of secretaries and clerks through profit-sharing and stock ownership than any other employer. "

Really?? Sorry, that just fiction. Try to find any clerks or secretaries who did. On the other hand Mircosoft, and Yahoo really did. By the way, if you invested a $1,000 in Wal-mart in 2000, today you would have $950. Not my idea of a great investment.

Wal-mart was trading at $50 in Aug of 2000 and today it is at $45.

Great article

I worked for Wal-Mart from 1978-1992..1994-1995 and I've yet to meet any secretaries or clerks become ' Millionares', though many of their Ex-Executives are living lives of luxury these days.

The first Ex-Wal-Mart Executive that comes to my mind is Dean Sanders. Back in the day, ole' Dean was Sam's ultimate ' Brownie Boy'. Dean had his nose so far up Sam's anus that it would have taken the Jaws of Life to pull him out of Sam's anus if Sam just happened to stop in his tracks. Dean's main purpose was to spread as much ' Pro Wal-Mart ' propaganda to the Wal-Mart associates as possible. He was paid to tell the associates that they would eventually get rich from Wal-Mart profit sharing.

Of course I've yet to see the average Wal-Mart associate get rich from profit sharing, however I do remember seeing Dean Sanders on the Travel Channel showing off his multi-million dollar Suv/Camper.

I've met Dean Sanders on several occasions back when I was working for Wal-Mart and of course back then, I had to keep my mouth shut. However if I only had the chance to cross pathes with him now!

If Kohl's, Penney's and Target are the answer I don't wanna know the question.
I bet their CEOs are loving it every time they hear people advertising for them.

All that pro-Wal-Mart propeganda is a load of BS.

If you want to hear a real story of what happened to someone who worked there, you should check in with my husband Austin Cushing (wizardofaus.gather.com ) - he posted about how they treat their employees on a regular basis while he had the misfortune of working there.

Do we even have a middle class anymore? It seems to me like we have two classes - rich and poor.

If the middle class truly has more disposable income, perhaps we first should contribute some of it to savings before we head to Wal-Mart or Nordstrom's. Personal savings as a percent of disposable income at the end of 2006 was at its lowest level since the Great Depression, though it had climbed to .6% by the end of June. Whether the savings rate is a reflection of income or the fact that we are spending beyond our means, I can't help but think it is contributing to the turmoil we're seeing right now.

Laura, I'm with you in approaching this story with the feeling that the middle class is declining -- instead being replaced by the rich and the poor. But once I took a look at the information, I walked away thinking, "Maybe the middle class may not have as much money as it used to, but it's at least using what money it has to buy the best it can afford, for the long term." That's me, and it certainly seems to be you. I see us as the middle class. And the retail numbers gave me hope that we're not disappearing -- instead, we're using all of this economic hubbub to spend our money more prudently. At least that's my hope.... Thank you for weighing in Laura. I've kept up on Austin's travails, and think there is an end in sight for the two of you. Keep up the faith!!

Good points Wil B.. The numbers for Wal-Mart were only disappointing because new projections for the year are lower than what its executives originally said. Yet, the numbers were still up for the second quarter (by 76 cents per share). Here's the Associated Press text:

"The company said that for the full year, earnings per share from continuing operations is now estimated to be between $3.05 per share and $3.13 per share. The company's initial forecast was in the range of $3.15 per share and $3.23 per share ... Wal-Mart shares fell $2.35, or 5.1 percent, to $43.82 Tuesday." [For more info, please read AP's "Wal-Mart Trims Year's Profit Outlook."]

However, I disagree with your conclusion that "fluctuations in consumption by middle class Americans has very little impact on Wal-Mart's numbers." You'll note just from the comments on this article, coming from those like myself that I would consider middle class consumers, that at least some people are making a concerted effort to not buy at Wal-Mart -- instead shopping at places like Kohl's. (Note that Home Depot's projections for the year have also been marked down.)

Indeed, the actual retail numbers released this week by all four of these companies indicate that not only is this a preference here on Gather, but it's a preference to enough other shoppers to make a noticeable difference in retail sales for these retailers. That's at least my personal inference into the numbers.

We know from economic reports that consumables in the U.S. cost us 2.4 percent or so more today than they did last quarter, so that could be reflected in the retail numbers. This fact could indeed negate Nordstrom and Penny's lead, but it doesn't come near to addressing Kohl's earnings jump of 15.8 percent.

Feel free to read the article that caused me to reach that conclusion, Penney's, Kohl's, Nordstrom Post Gains, and give me your take.

Good closing points Lisa. Excellent reminder to us all, especially in light of economic projections that things could get worse down the road.

Quality not quantity should be the reasoning behind purchasing dry goods.
Local food is tastier, cheaper and better.

My consumer dollars are spent on quality goods and fresh foods. When I do buy canned or boxed food I go to Aldi's. They're quality is right up there with most of the chain supermarkets and their prices are significantly lower.

BJ's is my choice for bulk buying. Good wages, clean store and top notch merchandise.

I live on a very low income, but manage to have a very decent lifestyle due to informed choices.

The period we are entering is creating a condition I saw in Tokyo in the late 1990's.

There and then, those fortunate enough to be young and climbing the ladder of success in business earned high wages, but real estate was so far out of their reach they could not imagine ever saving enough to own property in Tokyo.

So, they contented themselves with very expensive car purchases. In Tokyo, that is a HUGE commitment. Garaging a car can cost more than what most people spend on rent for living space.

In Japan, the luxury car phenomenon occurred in the face of a high savings rate. It was an expression of frustration -- something had to be done with some of that money.

In the US, we have not had a culture of saving or frugal living for many decades. I would not be surprised by a tendency toward buying the greatest luxury afforded by income. But a higher savings rate will probably happen on a generational fault line after a big shake up.

That said, I'm not sure I agree with the premise of your article. To conclude from one quarter's numbers that WalMart is ceding customers to higher margin retailers is probably reading the tea leaves before they are ready...

Comparing Costco to Walmart is like comparing Apples to Oranges. Similarly; you have the same problem with comparing Walmart to JC Penny, Kohl's and Nordstrom. They are totally different types of stores. If you are going to compare Walmart; it should be to K'Mart and Target.

Where the money is being spent does affect Walmart. The thing all these companies have in common is they are competing for some of the same consumer dollars. Walmart has it's place on the food chain. I don't think any of them are in business purely for altruistic motives; they are all seeking profit.

I agree with Billy G.; one quarter does not a trend make.

I am not an apologist for Walmart; but they must have done something right to get a big as they have. Will it last? Wasn't it John Maynard Keynes that said "eventually we all die" when referring to businesses? Eventually they will not exist as most business eventually cease to exist.

Great comments. Thank you so much all of you for contributing to a well-rounded conversation on the subject. Perhaps I was a bit too quick to jump on the "trend" bandwagon. But it's worth thinking about nonetheless.

Interesting article and comments. Unfortunately, many of us (including me) have been far too willing to use credit cards to buy things we want, but probably don't need. When that changes, as it seems it must, all retailers will take a hit.

Atleast them are one in the same, mark my word, sometimes theydo that tomake up for the loss competitions... its like being cheated and challenged... its business, the best thing is to forever good( compliments for the self/Whatever)

It's their choices... all we gonna do is watch and cry... and harvest to what they say economically... micro or macro...

it is about the market place... it is good to have multiples and try figuring out which one you have to decide big time....

This is definitely food for thought! Could someone let me know how they feel about the article on Selling Your home in a tight Market? thanks!

Wal-Mart is out of my way. Kohls when they have a sale. JC Penny's when they have a sale. I never pay full price for anything.

I guess I wonder if it's on credit or on salary that folks are buying all these things.

And I'm sure somewhere there are dead Nordstrom's executives that are rolling in their grave at the thought of being compared to Penny's or Khol's. :)

I avoid Wal Mart whenever it is possible. I do not like the way they deal with their suppliers. As Raven Spirit said, they go in and say either make it for my price or I will go oversees and get what I want. If the manufacturers want to sell their product they have to give them a price that leaves them little or no profit. I try to go to K Mart for things or if necessary I will buy less and pay a little more for quality.

interesting thanks for sharing