Wealthier US Shoppers Trading Down

Comparing the results of discount stores to moderately priced and more expensive stores shows that more consumers are shopping at discount stores. This shift makes sense given the weak economy, higher unemployment and consumer attitudes toward savings and debt. However, we were a little surprised to see how many higher income families have been trading down.

Recently, the Nielsen Co. put out a report on the increase in the number of high and middle income consumers shopping at dollar stores. According to Nielsen, households with incomes higher than $100,000 spent 18% more at dollar stores in the second half of 2008 compared to the year prior. Nielsen also noted that the rising cost of food, education and healthcare is forcing consumers at all income levels to seek out cheaper alternatives for basic household items including detergent, cleaning supplies, trash bags and paper towels.

We agree that part of the migration from more expensive stores to the discounters is due to the previously mentioned economic reasons. Consumers want to stretch their dollars, and discount stores allow shoppers save money on those basic items. We also believe that an overlooked reason for the migration is that discount stores like Family Dollar (FDO) and Big Lots (BIG) are doing a better job of retailing. These retailers have improved selection and quality of the merchandise they sell. The stores also offer shoppers a convenient layout that creates a more pleasant shopping experience.

The combination of improved merchandise, higher quality products, and convenient layouts continue to attract more affluent consumers to discount stores. We think this is a trend that is here to stay.

Subscribe by RSS Subscribe by Email