03/17/97 GRABBING BARGAINS--AND A $2 CUP OF COFFEE

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GRABBING BARGAINS--AND A $2 CUP OF COFFEE

Gil Pastore pulled his Jeep Cherokee into the Wal-Mart parking lot in Shelton, Conn., and hopped out to do a little shopping. The 35-year-old owner of a computer-service business bought a small pack of batteries, a big bag of dog food, and 20 minutes later was on his way.
Pastore, who figures Wal-Mart saved him $5 off supermarket prices, followed a distinctly 1990s compulsion of the middle class: He shopped discount. Increasingly, the middle class, a group that once expected to pay roughly the same price for the same goods no matter where they bought them, is splitting its budget between bargain stores that provide savings and purveyors of affordable luxuries that provide a taste of the good life.
INDULGENCES. The middle class may be proportionately smaller than it was two decades ago, but it has in no way disappeared. Some 40% of the U.S. population--or more than 100 million people--live in households earning $35,000 to $75,000 a year. What has fallen away, though, are the rules that govern their spending.
Stretched budgets have provided middle-class shoppers with plenty of reasons to look for savings, while the sale-filled recession of the early 1990s has trained them to expect markdowns, retail analysts say. Meanwhile, increasingly hectic work schedules have inclined people toward small indulgences such as a $2 cup of coffee, a $10 six-pack of beer, or gourmet take-out dinners. The result: Even those with middle-class incomes are contributing to a bifurcation of the mass market. ''Status has been redefined, so that it's not just the brand you have but also the deal you got,'' says Carl Steidtmann, director of research at Management Horizons, the retail consulting division of Price Waterhouse LLP. ''People are proud of buying discount.''
Just look at Wal-Mart Stores Inc., where annual sales have more than doubled in the past five years, to $93.6 billion. The discounter's legendary efficiency allows it to offer name-brand goods at substantially lower prices--an enticing proposition no matter what your income bracket. Indeed, a tour of a typical Wal-Mart parking lot shows shiny new luxury sedans and 4x4s alongside aging subcompacts in need of a paint job. ''You hear that the economy's doing well, but I travel all over the state, and the economy's tough,'' says Pastore, who usually buys only brand-name items at Wal-Mart. ''If a family can save $200 to $300 over a year, that's a lot of money.''
Nor does the middle-class obsession with bargain hunting show any signs of petering out. Forty-seven percent of U.S. consumers plan to spend more money at discounters this year over last year, according to Ernst & Young's Forecast '97 survey. Only 7% say they will spend less.
Of course, consumers in all brackets continue to crave a little luxury in their lives. Savvy marketers are figuring out ways to provide it--or at least a close facsimile--for a reasonable price. Ernst & Young points to these affordable luxuries as one of the six big consumer trends in 1997. ''If before we were buying ourselves a new car every three years or going on a cruise every two years,'' says Mark Barden, founding partner at the San Francisco ad agency Black Rocket, ''now we're buying ourselves a really, really good cup of coffee.''
Indeed, Starbucks Corp. and other upscale coffee houses have proliferated in the last five years. Meanwhile, brands from Jeep to Gucci have begun to license their logos for use on items from boom boxes to perfume, appealing to people who like a luxury image but not a luxury price. As marketers from Wal-Mart to Starbucks have discovered, convincing consumers that you offer either a great bargain or a great treat can prove irresistible to the '90s shopper.
By David Leonhardt in Shelton, Conn.

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