Trouble in the Middle Market
You might think that in our fragile economy companies that target the huge, amorphous mid-market would be thriving. You’d be wrong. The ‘mushy’ middle market — served by brands like Sony, Dell, GM and others — is getting cannibalized at the high end by brands like Apple and Hermes, and at the low end by Ikea and H & M. The New Yorker’s James Surowiecki explains:
The products made by midrange companies are neither exceptional enough to justify premium prices nor cheap enough to win over value-conscious consumers. Furthermore, the squeeze is getting tighter every day. Thanks to economies of scale, products that start out mediocre often get better without getting much more expensive—the newest Flip, for instance, shoots in high-def and has four times as much memory as the original—so consumers can trade down without a significant drop in quality. Conversely, economies of scale also allow makers of high-end products to reduce prices without skimping on quality. A top-of-the-line iPod now features video and four times as much storage as it did six years ago, but costs a hundred and fifty dollars less. At the same time, the global market has become so huge that you can occupy a high-end niche and still sell a lot of units. Apple has just 2.2 per cent of the world cell-phone market, but that means it sold twenty-five million iPhones last year.
