Once viewed as “middle-income America,” cities like Nashville, Austin, and Columbus are redefining certain consumer characteristics. Those cities have retailers rethinking how wealth distribution is assessed beyond the top 6-10 major cities. The south and the midwest was long thought to represent a higher concentration of middle income consumers than coastal cities like New York, San Francisco, and Los Angeles. Luxury retailers like Gucci and Prada are looking beyond midwest stereotypes and finding positive results.
There’s opportunity everywhere, even when the might of the American economy seems to be diminishing by the month. At the same time, within the middle-income strata of consumer, inflation is beginning to hit them where it hurts the most. These two ideas appear to be paradoxical at first glance.
Cowen researchers led by Oliver Chen found that 66% of households earning $50,000 to $100,000 expect to slow their spending due to inflation, up from 63% last month. They estimate Kohl’s core customer’s income lands firmly in that range, between $80,000 and $110,000. 
The pandemic and post-pandemic correction made “business as usual” impossible to predict for retailers that appeal to middle income Americans. Consumer behavior reverted back to the mean much quicker than anticipated, and it became difficult to forecast around unpredictable demand. This was only exacerbated by the months-long constriction of supply as ports backed up and deliveries slowed to a halt. Retailers with means were able to throw money at the supply chain problem with the employment of creative freight strategies and alternative sourcing but even the deepest pockets couldn’t account for fast-evolving demand.
Now, many of those same retailers are facing an inventory problem exacerbated by knee-jerk reactions to those same pre-holiday supply chain delays. Target, Walmart, Macy’s, Kohl’s and other retailers like Gap and American Eagle all reported higher inventory levels, excess product in categories like furniture and lower operating margin. In a June 2022 inventory report, 2PM expressed concerns about a number of retailers known to appeal to middle-income America: Bath & Body Works, Ross Stores, Carter’s, Target, Walmart, TJX Companies, Foot Locker, and Kohl’s.
Kohl’s was in the most precarious position with the third-highest growth in post-pandemic inventory (behind Target and Ross). Of those three, however, Ross had the steepest fall in sales over Q1 and Q2 (report attached).
But middle-income America and middle America income are not one and the same. The woes of mass market retailers describe a problem unique to middle-income America. Middle-American income has evolved to mean something different to the analysts and researchers who project the viability of retail expansion into certain regions:
Gucci in Columbus, Ohio. Chanel in Troy, Mich. Hermès in Naples, Fla. 
What the analysts who work for these luxury retailers are suggesting is that Middle America income is now viable enough for many of them to invest in real estate and employment in oft-forgotten regions. For these “second-tier cities”, they are no longer emblematic of middle-income America. Analysts have long assumed that regions like the Midwest answer to both descriptions but retailers are suggesting that there is divergence in this long-held interpretation. Retail data tells the tale: they are finding that enough of the top 10% enjoy the mild weather and humility of Ohio, Michigan, and Pennsylvania. Or the low taxes and sweltering heat of places like Austin, Naples, Scottsdale, or Nashville.
The geographic middle of the United States is slowly shedding the perception that it serves as a proxy for a concentrated group of middle-income Americans. There is opportunity to be found for retail brands looking to engage with non-coastal, upper-income consumers. Believe it or not, you can find these consumers anywhere – even in places like Tennessee, Ohio, Pennsylvania, and Michigan. This is what the data continues to show. In September 2021’s New York, Los Angeles, and Columbus I riffed on the idea that eventually, consumers will view America’s second-tier cities as ideal for upper-crust retail endeavors. Columbus served as a stand in for the many forgotten cities:
The consumer mix has reassured a growing number of luxury brands that they are ready for market expansion. Wealth and opportunity are dissipating. I grew up believing I needed to be in New York, Los Angeles, or San Francisco to succeed. If you were a child from the South or the Midwest, unless you were well-traveled, you believed that your success would rely on your proximity to the centers of the world. This is less so the case than it was even a decade before.
There have always been higher-income, luxury consumers outside of the coastal hubs known to the world’s very best retailers, but the pandemic likely accelerated a growing presence of those consumers in and around cities like St. Louis and Austin:
Kering, which also owns Saint Laurent and Bottega Veneta, says it plans to capitalize on fast-rising U.S. demand by opening more than 30 new U.S. stores over the next couple of years, including Gucci boutiques in New Orleans and St. Louis, and a Saint Laurent store in Detroit. A new Gucci store in Columbus—the company’s first stand-alone store in Ohio—opened in July, with another new store in Austin having opened in April.
“These cities have changed structurally, it’s not just a spike,” Francois-Henri Pinault, Kering’s chief executive, told reporters earlier this year when outlining the group’s U.S. growth plans, describing what he saw as a permanent shift that had turned these cities into long-term markets for luxury brands. 
The majority of American wealth will always concentrate in places like San Francisco, New York, and Los Angeles but there is something to say for luxury’s finest retailers finally beginning to address their customers where they are. What may appear to be a risky real estate investment may actually serve as a hedge against falling retail numbers. Mainstream retailers like Kohl’s will see a “reduction in spend in the face of surging inflation”, as the WSJ notes. But it’s also an acknowledgment that affluent consumers are more insulated from the effects of inflation.
Luxury consumers are everywhere and there’s no better way to reach them than by erecting a store nearby their neighborhoods. For retailers like Gucci, Hermès, and Prada, stores are less about inventory and more about experience. This de-risks stores in ways that Target and Kohl’s can never duplicate. There’s no substitute for experiential retail.
In Columbus, Ohio, the state’s sole standalone Gucci store sits adjacent to two LVMH darlings: a Tiffany and a Louis Vuitton store. These retailers have seen great success within Easton Town Center, the region’s most visible and successful retail development. It’s a sign that many of the finest brands in the world have the opportunity to expand their reach by identifying new pockets of consumers who crave the depth of relationship that only physical retail can provide. It sounds like a paradox but in cities like Columbus, Nashville, and Austin, physical retail is reaching new consumers in authentic and meaningful ways.
It’s now consensus that Middle-America income and middle-income America are no longer communicating the same idea. Middle-America income is no longer viewed as moderate, average, or midwestern. And middle-income America is no longer perceived as specific to certain regions. As inflation continues to eat into the discretionary income in every geography and demographic. The finest retailers will work to find more of their target consumers wherever they may.
By Web Smith | Edited by Hilary Milnes with art by Alex Remy and Christina Williams