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Walmart's latest deal confirms the death of the middle class

Business Insider logoBusiness Insider 2017-11-14 Hayley Peterson

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Walmart is adding Lord & Taylor and its many designer fashion brands to its website, the companies announced Monday.

The deal is the latest in a series of moves by Walmart designed to target wealthy shoppers, which the retail giant has historically ignored in favor of customers at the opposite end of the income spectrum.

"We see customers on our site searching for higher-end items, and we are expanding our business online to focus on adding specialized and premium shopping experiences, starting with fashion," Denise Incandela, the head of fashion for Walmart US e-commerce, said in a statement.

Walmart wants to turn its website into a "premium fashion destination," she said.

The new Lord & Taylor site will launch on Walmart.com in spring 2018. Customers may be able to pick up and return Lord & Taylor items at Walmart stores as part of the deal, according to the Wall Street Journal. Lord & Taylor will also continue to operate its own site separate from Walmart.

Walmart's race for higher-income shoppers began earlier this year with its $3 billion acquisition of Jet.com, which attracts a younger and wealthier group of shoppers than Walmart. The retailer has also been snatching up trendy retailers like Bonobos, ModCloth, Moosejaw, and Shoebuy.

The acquisitions have all been part of a plan designed to "elevate the Walmart.com brands," Walmart e-commerce CEO Marc Lore said in October.

The retailer's strategy of aiming for customers at the furthest ends of the income spectrum highlights the widening gap between wealthy and poor Americans and the disappearance of the middle class, which was once the most sought-after class of income-earners in the country.

The middle class is dissolving

When Walmart was founded in 1962, the middle class in America was thriving.

"From postwar to about the late 1970s, you wanted to be in the mid-tier of retail. That is where everybody was making a fortune, including Walmart," Doug Stephens, a retail-industry consultant, told Business Insider. "Then from 1980 onward, you wanted to pick a side, because it started to become clear that the middle class was evaporating."

Contributing to this trend were the deterioration of union jobs, the shift of manufacturing jobs overseas, and the growth of the knowledge economy that led to a boom in high-skilled jobs.

After the Great Recession, several other factors aggravated the problems facing mid-tier retailers.

Consumers started saving more money, and mall traffic plunged along with spending on apparel and accessories.

People started shifting their spending from durable goods to experiences, travel, and restaurants. Consumers also started dealing with higher fixed expenses from increasing technology and healthcare costs.

As shoppers' spending habits changed, the middle class declined. Between 2000 and 2014, middle-class populations decreased in 203 of the 229 metropolitan areas reviewed in a Pew Research Center study.

That's why today, both high-end retailers and discount retailers are thriving — or at least surviving — while companies that relied heavily on middle-class spending, like Macy's, Sears and J.C. Penney, are closing hundreds of stores.

Related gallery: Best and worst states for the middle class (provided by GoBankingRates)

a little girl sitting on a bench: <p>Although the middle class is shrinking, there are a handful of states where middle-income families continue to thrive.</p><p>But first, what is considered middle class? The Pew Research Center defines "middle-income households" as those with an income that is two-thirds to double the U.S. median household income. And two of the <a href="https://www.gobankingrates.com/making-money/reasons-americas-middle-class-faces-bleak-financial-future/">biggest concerns for middle-income families</a> are securing a good education for their kids and being able to afford housing.</p><p>With that in mind, GOBankingRates determined the best and worst states to live on a middle-class income by analyzing the following data in each state:</p><strong>Income trends:</strong> This includes the change in median household incomes of middle-class families and the change in the proportion of households earning the middle-class income. <strong>Higher education trends:</strong> This includes the college graduation rate, as well as tuition and fees, and the five-year change in tuition.<strong>Housing trends: </strong>Lastly, this factor includes the median home list price, the estimated monthly mortgage payment and the homeownership rate. <p>Click through for the full methodology and to <a href="https://www.gobankingrates.com/making-money/best-worst-states-families-live-richer-life/">see if you live in one of the best places to raise a family</a> on a middle-class income.</p> Best and worst states for the middle class


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