Dollar Stores Flourish Because They're Fun
According to the Wall Street Journal, discount/single-price point stores like Family Dollar Stores Inc. (NYSE: FDO), Dollar Tree Stores Inc. (NASDAQ: DLTR), and the soon to be KKR owned Dollar General Corp. (NYSE: DG) are growing in popularity [subscription required] with consumers, reporting solid same-store sales growth and expanding sales of food products. According to Family Dollar CEO Howard Levine, "The low-income customer is always stressed and always strained. When things like a minimum-wage increase happen, that's a great benefit to them. When gas prices come down, that's a great benefit to them, and conversely when they go the other way, that has a negative impact."
Because of sky-high real estate prices in my area, we have no dollar stores. There used to be one in a local mall but it got replaced by a jeweler. I'm not kidding. However, anytime I'm traveling, I go to a dollar store, not because I'm "always stressed and always strained," but because it's fun. I was recently driving with my brother and we passed a Family Dollar and I practically ordered him to turn the car around. He reluctantly agreed with only this protest: "You are such a loser."
He waited in the car while I went in and returned with bottles of knock-off designer colognes (On clearance! 33 cents each! Great gifts for people you don't even like, and good car fresheners too!), body wash (about $2 less than it costs at the grocery store), a couple old Sherlock Holmes DVDs (I'm a dork, what can I say?), and assorted office supplies and some candles.
I mention this because while I'm certainly not the consumer that Family Dollar's CEO described in the conference call, I think I make up one of the core groups that discount stores appeal to: People who just enjoy saving money. For me, the thrill of saving a dollar or two on antiperspirant is worth a lot more than the money. It's the thrill of the hunt; it's the feeling of being a savvy consumer who doesn't pay more for stuff than he has to. Wal-Mart Stores Inc. (NYSE: WMT), the greatest -- for better or for worse -- discount retailer of all seems to understand this. In March, I wrote about the company's new efforts to target its three core demographics:
"There are 'brand aspirationals' (people with low incomes who are obsessed with names like KitchenAid), 'price-sensitive affluents' (wealthier shoppers who love deals), and 'value-price shoppers' (who like low prices and cannot afford much more)."
When I was at the dollar store, I noticed quite a few luxury cars in the parking lot. It got me to thinking: How many people shop for discounts because they really need to, and how many people just enjoy a bargain?Dollar Store Services
4505 West Hacienda Ave., Suite I
Las Vegas, NV 89118
1-800-829-2915
FAX: 1-702-382-8454
TEL: 1-702-382-8444
Email: sales@dollarstoreservices.com
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