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Jennifer Marks

Low-Budget Retailers Take a Harder Line

December 16, 2013

As more middle-class consumers are sliding into lower middle class status (or worse), the retailing formats that have long served the most cash-strapped consumers have taken a page out of the Walmart playbook circa 1995 and are ever more heavily relying on consumables and other fast-turning hard lines to drive traffic.

And it seems to be working.

Dollar General, which now operates more than 11,000 stores, is experiencing its highest levels of growth from tobacco, perishables, candy and snacks.

Family Dollar's third quarter velocity was strongest in consumables, particularly frozen foods, health aids and tobacco. A basket with tobacco and other consumables in it at one of the company's 8,000+ stores now averages $17, the company said. That's huge. A decade or so ago, the average transaction at in the dollar store channel hovered around $9.

Regional deep discounter Fred's began adding consumables a few years ago to goose traffic, and more recently is seeing the addition of pharmacies, auto parts, and basic hardware propelling greater sales.

Shopko is pushing deeper into rural communities with its Shopko Hometown format, which offers retail health services along with an edited selection of consumables, apparel, home furnishings, toys, consumer electronics, seasonal items, and lawn and garden.

It's not that these retailers don't sell soft home, but they are de-emphasizing it.
Take a look at who did great with home textiles during the third quarter: the Pottery Barn franchises, West Elm, Macy's, HomeGoods,
TJMaxx/Marshall's, Stein Mart, HSNi. Looks like middle and upper-middle consumers are still shopping the sheet and towel aisles.

The question for the industry is how to create product for the have-nots. Dollar General alone plans to add 700 stores next year. That represents an opportunity for about $10 million in additional home textiles sales.

And somebody's going to grab that business.