When Dollar Stores Are Too Expensive

[Purveyor]

By Annie Lowrey
Slate.com

When 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 are 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.

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[canoeist52]

1. My family has quit buying crap.

And most of what is in dollar stores isn't useful or is cheaply made junk. The day I quit the dollar store is when I bought paint roller refills. One pain-loaded swipe on my wall and the fuzz rolled right off the roller. Wasn't worth the dollar to me.

The other thing is, if we don't need it, we don't buy it!

[EFerrari]

3. Hand soap, sanitizer, garbage bags, paper napkins, towels, tp

laundry soap, all cheaper at the dollar store. My mom goes there every week.

[SoCalNative]

2. The only thing I usually buy these days

at my 99 Cent only store is food stuffs like frozen or canned veggies and some fresh produce.

[Warpy]

4. People in my area go to Big Lots and the Dollar Store

located conveniently next door to each other to stock up. Then they go to the high priced store, Walmart, for the few things they couldn't find at the rock bottom stores. Being able to fill stomachs for the week is more important than being able to choose what to fill them with right now.

I've noticed people buying fewer paper products, too. It seems about the only thing still selling well is toilet paper. People are following my pattern with paper towels, taking at least six months to use up a roll and saving it for stuff that's too greasy or yucky to use a sponge or dishtowel on. Shampoo is selling. Conditioner is not.

Thrift shops are packed with people clothes shopping. Yard sales of clothing are also doing fairly well although they don't bring in much money.

We're still stampeding to the bottom in my part of town. There isn't a single strip mall around here that is full. Things are bad and getting worse.

These are the reasons any time I hear the word "recovery" I issue an involuntary, derisive snort.

[dixiegrrrrl]

5. "margin compression" is indeed an ominous sign.

where does a merchant go after he has squeezed all the margin he can, while his cost continues to rise, but passing it on will lose him more customers?
Very ominous sign.

Still interestingly, as I lurk in "my" Dollar store when shopping, I see that soda and chips are still selling well.

[Possumpoint]

6. Another Indicator

Just went to the local farmer's market this morning. Open Sundays early to 1pm only. Parking lot, which is a very large commuter lot during the week, was swamped. Left the market, passing a major grocery chain store just around the corner and their parking lot was nearly empty. In comparison with the quality and prices at grocery stores in my area the farmers market won hands down. Their prices were excellent considering the very high quality being offered.

[peace frog]

7. We buy plenty of necessities at the dollar store

Many items are the same brand and packaging as can be found in a higher-priced store. Even in health and beauty aids, name brand makeup and hair products are available for less money. I laugh to myself when I remember dropping serious dime at the Clinique counter at Macy's in my youth. Those days are gone, baby, gone.

[kestrel91316]

8. I can get some decent basic produce at our dollar store. Canned tomatoes

are a steal there, and eggs, milk, and some other food items. Most of their cheap Chinese plastic crap is just that and I don't buy it, though.

[caty]

9. I buy most of the

non food items I purchase at the dollar store. Garbage bags, dish washing liquid, dishwasher soap, detergent, cleanser, softening sheets, deodorant, razer blades, paper towels, facial tissues, storage bags, etc. I try them, and if they are sufficient, I keep buying them. If not, I don't buy them again. I save at least $20 - $30 a week going to the dollar store. Recession or not, that's where I go first.

[JI7]

10. part of it is also that the non neccessity gift type items are mostly crap and break up easily

so even if you have the money you wouldn't buy that crap again.