by Stella Ong


Department stores have been closing their doors at alarming rates, and analysts attribute it to a single overarching factor.

Over the past decade, the retail industry has undergone significant transformations. Traditional department stores like Nordstrom ($JWN), Myer ($MYR), and Marks & Spencer have faced declining margins and store closures. But at the same time, budget retailers like T.K. Maxx ($TJX) and luxury brands like LVMH ($LVMUY) have experienced record revenues

What’s driving this phenomenon, known as “retail bifurcation”? Analysts point to a significant issue that poses challenges not only to the retail sector, but to global economies and industries at large: the dwindling middle class.

Defined by the OECD as people living in households earning between 75% to 200% of a country’s median income, the middle class has noticeably shrunk from being 64% of the OECD population in the 1980s to 61% by the mid-2010s. If it seems like a minor change, note that 3% represents about 41m people. The U.S. has it even worse: in the last 40 years, 11% of the country’s population has been displaced from the middle class. 

Amidst various contributing factors, the crux of the matter is: stagnant income growth and rising living costs have hindered a significant portion of the younger generation from attaining middle class status. Just 37% of single-earner households belong to the middle class today, in striking contrast to 54% in previous decades.

The middle class plays an essential role in macroeconomics. Data has proven that a thriving middle class spurs economic growth thanks to a larger labour force and more stable demand for goods and services. Moreover, they exhibit greater resilience to economic downturns compared to lower and upper classes. And socially, a larger middle class fosters stronger trust between social classes – it softens income inequality and enables more people to attain a comfortable standard of living.

Where the population split goes from here will depend heavily on global policy and governance. The retail sector is merely mirroring the changing demographics: the top and bottom are growing, while those in the middle are struggling.

Portrait photo of Stella Ong, Markets Analyst at Stake.

Stella Ong

Markets Analyst

Stella is a markets analyst and writer with almost a decade of investing experience. With a Masters in Accounting from the University of Sydney, she specialises in financial statement analysis and financial modelling. Previously, she worked as an equity analyst at Australian finance start-up, Simply Wall St, where she took charge of the market insights newsletter sent out to over a million subscribers. At Stake, Stella has been key to producing the weekly Wrap articles and social media content.


Want more?

You know what to do

Insights, trends and company deep dives delivered straight to your inbox.

Stake logo
Over 7,000 5-star reviews
App Store logoGoogle Play logo

Subscribe to our free newsletters

By subscribing, you agree to our Privacy Policy.

Stakeshop Pty Ltd is registered as an overseas company in New Zealand (NZBN: 9429047452152), and is registered as a Financial Service Provider under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (No. FSP774414). We hold a full licence issued by the Financial Markets Authority to provide a financial advice service under the Financial Markets Conduct Act 2013. However, the content on this website has not been prepared to take into account any of your individual objectives, financial situation or needs. To the extent you require further information about the relevant New Zealand legislation that may apply, or require specific advice, please contact your legal and/or financial adviser (as appropriate). The information on our website or our mobile application is not intended to be an inducement, offer or solicitation to anyone in any jurisdiction in which Stake is not regulated or able to market its services. At Stake, we’re focused on giving you a better investing experience but we don’t take into account your personal objectives, circumstances or financial needs. Any advice is of a general nature only. As investments carry risk, before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Terms & Conditions, Privacy Policy, Financial Advice Disclosure and Disclaimers before deciding to use or invest on Stake. By using the Stake website or service in any way, you agree to our Privacy Policy and Terms & Conditions All financial products involve risk and you should ensure you understand the risks involved as certain financial products may not be suitable to everyone. Past performance of any product described on this website is not a reliable indication of future performance. Stake is a registered trademark under class 36 (New Zealand).

Copyright © 2024 Stake. All rights reserved.