Bargain Basement and Top Shelf: What’s Driving Growth for Retailers?

BY Elizabeth Shell  December 23, 2011 at 6:17 PM EDT

Photo by flickr user Ian Britton, post by Elizabeth Shell.

“We’re all peacocks. We all like to show off.”

That’s what Milton Pedraza, CEO of the Luxury Institute, told us recently in a conversation about changes in spending trends amid an “hourglass” economy. He noted that there is high demand among wealthy consumers for high-quality, high-value products in part, it seems, because of what they symbolize to others.

“When you [have] a Birkin bag or a Kelly bag from Hermès, 99 percent of people are not going to know what it is,” he said. “When you walk into a boardroom … people will know. And that is a great deal of value of that very exclusive tribe of luxury consumption.”

On the other end of the spectrum, consumers who shop at bargain stores simply want a great value, and many may be looking to get more bang for their buck as wallets and budgets continue to tighten.

“People are shopping at our stores in record numbers, and they’re buying more each time they shop,” said Shelley Davis, spokesperson for Dollar Tree, which reported an 11.9 percent sales increase for the third quarter and a 4.8 percent increase in same-store sales.

Top luxury brands, such as Gucci, Louis Vuitton and Chanel have been doing phenomenally well, according to Pedraza — and so have the bargain-basement shops like Dollar General, Family Dollar and Dollar Tree. But the middle’s being squeezed. According to an oft-quoted article by The Wall Street Journal, products geared toward the middle-class consumer, those households making $50,000 to $140,000 a year in income, are being outsold by products catering to those at the high and low ends. Retail analyst Anthony Chukumba cited Kohls and JCPenny as examples of struggling mid-marketers. On Thursday’s broadcast we explored the world of retail in a bifurcated economy, and why firms are investing more in selling either to the deeply pinched or the deep-pocketed.

So, what types of items are pushing sales at these ends of the hourglass? And what can you expect to pay for them? We’ve compiled the slideshow above of products from luxury brands that research firm Millward Brown Optimor named the world’s most powerful, and products that are driving growth for dollar stores.

This entry is cross-posted on the Rundown- NewsHour’s blog of news and insight. Follow business and economics correspondent Paul Solman on Twitter.