The “Missing Middle Tier” Consumer
A lot of business owners I work with who opened in 2018 or 2019 have been telling me lately they’re having a hard time understanding their financial forecasts because nothing they’ve experienced since the day they opened has been normal.
5-6 years should be plenty of a window to get a good read on normal patterns and margins, except when it’s not. And this last half of a decade is not.
Here at CVEDC, we support a segment of the state of Vermont’s 78,000+ small businesses. According to the SBA, 99% of businesses in Vermont are small businesses. Those businesses employ 150,000+ people, over 60% of our workforce.
Who owns these businesses? Most of the business owners I work with do not bask in a lot of luxury of time, money, or a stress-free working life. They are constantly thinking about how to improve and how to do well for their own family and the families of those they employ. And it’s a very challenging environment to be in, in no small part because of the lack of predictability the last half decade has offered us.
Business revenues were good in 2018 in this region, and many people saw an incredible 2019. Then we crashed into 2020, when everything we knew about living and working radically changed for at least a short time. Just as the chaos of Covid wound down, two devastating floods changed everything for many of us.
The once very routine activity of using the last few years’ worth of profit and loss statements to make reasonable decisions about inventory purchasing and cash flow predictions is completely unwieldy. All businesses in the Central Vermont region now show data completely driven by three “once in a lifetime” experiences that flew at us all at once.
And what about consumer behavior during this period? Culturally, we saw an introduction of specialized, curated sales pushes during Covid. An emphasis on “self care” and bespoke products appealed to those who were trapped at home but still earning regular pay. A responding wave of entrepreneurship saw at-home businesses start up quickly around products and entertainment created in people’s homes and marketed online.
Everyone’s experience during the pandemic was different, and while some people had spent a couple of years in a bit of a bubble, many people saw unprecedented struggles. The gap between those who can afford extras and those who cannot felt deeper than ever. Prices went up, and fewer people could afford them.
As we all came back outside together, the world had changed a little bit. And here in Central Vermont, the outside we all share really changed once more these last two disaster-filled years.
I had a good conversation with social media expert Brittany Winfield of The Winfield Creative about what she described as a “missing middle tier” of consumers that she’s been strategizing outreaching to with her clients. How much can they spend? Well, it’s tough to say.
“Somewhere in between the highest package of services you could possibly offer and The Dollar Store,” she said to me, laughing. I hear that.
Many of you know that prior to this role, I spent almost two decades working in book publishing. Specifically, I was the first full-time employee of a small publisher based in Waitsfield. The company I worked for for many years was formed the same year as CVEDC, 1976, and it centered on one creative idea.
Eventually that idea was mass produced in the form of 275 million paperback books, retailing at less than $2 at the time. Today they are still less than $10. This is a product for the missing middle tier. As a book series, the ideas was scalable, and it allowed the publishing company to eventually grow in ways no one ever dreamed of back in 1976.
My day to day involved lots of the topics I now enjoy working on with a variety of businesses. I worked to develop models for understanding and predicting our Rate of Movement, the expected sales and inventory demand for the 100+ different SKUs we produced. I oversaw domestic and overseas production of those SKUs and managed vendor relations. I project managed the books into creation as an editor, hiring and managing the teams that would contribute the creative assets to each title.
All of this work helped me to empathize with the many decisions a small business owner makes every day, week, and year. And it prepared me to notice trends among the whole region and understand their implications.
I don’t want to diminish the vibrant talent and handiwork that goes into the very Vermont creation of high-end furniture, art, and many other types of incredible products that are carefully hand-rendered and have the prices to justify it. But I have been wondering lately if we are in a new era of consumer behavior, one that will rebel against paying a lot for something special and ask instead for that “missing middle” price, even if there’s a bit less to be experienced by the purchase.
When I analyze overall economic trends in our region, I encourage business owners to ask: do they have any room to try out new concepts, maybe even aim for larger groups of customers, while staying true to their values and vision? We’ve all been told repeatedly to pivot, to mitigate, to be resilient, and it can be tiring to consider.
If this line of thinking appeals to you, or even if you dispute it, we welcome your engagement! Community conversations make this conversation richer and more informed and we welcome all points of view. And if this inspires you to discuss scaling your work, or streamlining your process, please be in touch. We along with partners like Vermont Manufacturing Center and others offer many services, some free, to support this stage of growth or investigation for your business.
Wishing you well,
Melissa Bounty, Executive Director