When Dollar Stores Are Too Expensive

[didymus]

Slate:

When Dollar Stores Are Too Expensive

Even dollar stores are strugglingWhen he was Fed chairman and had access to the best economic data and minds on the globe, Alan Greenspan famously liked to forecast the direction of the economy by studying sales of men’s underwear. Even during the best of times, underwear purchases remain pretty flat, he noted. (What dude who has just gotten a raise thinks: “Ah yes! I’ll upgrade my entire collection of briefs now!”) Only during the worst of times—when people are really, really cutting back—do boxer and brief purchases drop off.

The reverse logic usually holds for America’s dollar stores. Customers flock to the chains, which sell thousands of products for a buck or $2 or $10, when times get tough. When the economy improves, they shop at nicer outlets, like Target. But there are some worrisome signs that the prolonged economic malaise has changed even this retail paradigm. Middle-class households remain reluctant to spend. And cash-strapped consumers are finding even dollar stores a bit too expensive.

To be fair, Dollar Tree, Dollar General, and Family Dollar, the three big national chains, all posted strong profits in the first quarter of the year, the last for which data is available. That is not just because they are opening new stores but also because same-store sales have continued to grow as more and more customers trade down.
Nevertheless, all three reported ominous data in the past few weeks. The *Wall Street Journal *noted that two of the three missed earnings targets. And the companies’ investor notes report that customers are buying fewer discretionary items, like hand lotion and decorative goods, and more “consumables” and household items, like toilet paper.

In short, families are shopping more at dollar stores. But they are buying only what they need. They are picking up low-margin goods, cheaper per unit at dollar stores than places like Wal-Mart, and sold in smaller packages to let customers spread purchases out.

I wonder if things like this indicate the true state of the economy better than the inflation rate, GDP, Dow Jones index, &c, &c.
Why you’re buying groceries who cares what the discount rate is besides financiers?

 

[Ridgerunner]

Yikes! No wonder my underwear seems to be getting progressively smaller. It’s not that I’m putting on weight, it’s that they are cheap and shrink!

Kind of reminds me of that old joke, you know, about the guy with the intractable migraine headaches who goes to the doctor and is told…

 

[Trader]

Slate:

I wonder if things like this indicate the true state of the economy better than the inflation rate, GDP, Dow Jones index, &c, &c.
Why you’re buying groceries who cares what the discount rate is besides financiers?

It still sounds inflationary to me. I grew up near the Ben Franklin 5 and 10 cent store, and now the best we can do is the dollar store? That is 1000-2000% inflation.

 

[didymus]

Yikes! No wonder my underwear seems to be getting progressively smaller. It’s not that I’m putting on weight, it’s that they are cheap and shrink!

Kind of reminds me of that old joke, you know, about the guy with the intractable migraine headaches who goes to the doctor and is told…

Ridgerunner, I just noticed something; is there really a place “Aux Arcs” or is it the Ozarks putting on airs? Inquiring minds . . .