Retailers Should Take the High Road or the Low Road

America's shrinking middle class is forcing retailers to aim for the high end or the low end and to skip the middle, according to Platt Retail Institute, which reports that Wal-Mart is headed up market.

But Platt warns that going up market can be challenging: "Ten years ago, J.C. Penney, the mid-market retailer, ran into problems when it introduced pricier designer clothes and home furnishings. It has since regained its footing as the retailer of fashion-forward clothing to the mid-market mall shopper within its price points."

Retailers that are positioned in either the upper or lower segment, Platt says, will need to find growth within their market or look for growth elsewhere. For example, Platt explains, Home Depot has experimented with high-end stores and continues to consider overseas expansion.

Retailers at the low end will drive out system costs and frills, according to Platt, which cites self-checkouts as an example.

Finally, Platt says, strong retailers in either camp will aim to extend their range of services. As an example, Platt notes that Best Buy created the Geek Squad, which goes to customer homes to install large screen TVs or set up wireless networks.

Likewise, Home Depot hires kitchen designers and offers roof repair. Walgreens is offering in-store medical exams, and Wal-Mart has begun adding SmartCare family medical clinics to some stores.

Whatever the tactic, the message from Platt is to pick the high end or the low end and stay out of the shrinking middle.