The rise of the dollar store – catering to a disappearing middle class with shrinking incomes has made dollar stores prosper in the last decade. In last decade Family Dollar grew by 62 percent in store count while U.S. population only went up by 8 percent.
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Dollar stores for most Americans carry an odd sort of stigma. In the past, these locations were seen as shopping hubs for the poor only. Yet as we all know many in the once strong American middle class were thrown off the prosperity treadmill and into lower income brackets. While companies struggle with growing dollar stores have found a niche in this climate. A shrinking middle class means more customers. All we really need to do is examine the growth in employees and in store numbers for a couple of large dollar stores in Family Dollar and the 99 Cents Only Store. These businesses have done well in this economy for a variety of reasons but the number one reason is a shrinking pocketbook has taken away the stigma of shopping for less. Austerity is back in fashion.
The growth of Family Dollar
Source:Â Retail Sails
In 2001 Family Dollar had approximately 4,200 stores. Today it has 6,817. While the U.S. population increased by 8 percent during this time Family Dollar stores expanded at a rate of 62 percent. Part of this has to do with the reality that the average annual per capita income in the United States is $25,000. I remember many years ago going into dollar stores and recalling the amount of trinkets that were being sold. These stores had oddball items. But today you will realize that many of these stores have become like half supermarkets. In fact, Family Dollar largely sells food:
This reality also blends in with the fact that we now have over 44 million Americans receiving some form of food assistance. The amount given each month is minimal but people are now being forced to live with much less and dollar stores are catering to this ongoing trend. Family Dollar employs over 50,000 people and has net annual sales of $7.9 billion. This is no small niche market. Yet the unfortunate side is that it reflects a struggling American middle class that is shrinking as each day goes by. Take a look at the growth in food stamp participants:
Source:Â Zero Hedge
This isn’t exactly a trend we want to see occurring. Yet these dollar stores provide a larger portion of the U.S. population access to cheap food which is clearly in demand. You wouldn’t grow your store count by 62 percent when the population increased by 8 percent if there was lack of demand. The growth came largely from the disappearing middle class and many more people being pushed into lower class positions and a reduced income base.
The 99 Cents Only Store
The 99 Cents Only stores are largely concentrated in California but have expanded out to states like Texas and Arizona. Even in the seemingly prosperous state of California we see growth as well:
We see a similar pattern here. The growth for 99 Cents Stores has been more aggressive in terms of store counts. In 2002 there were roughly 120 stores and today we have 285 stores. This is more than doubling the store count while the population again only increased by 8 percent. What this signifies is a demand in the market for rock bottom low cost stores. The middle class is truly shrinking and these businesses simply provide lower priced goods for a shrinking paycheck. I know our brand obsessed media is only focused on Gucci and BMWs but the reality is people are struggling and the demand being observed here merely confirms this new reality.
It should also be clear by the above charts that this trend is nothing new. These businesses were expanding at a rapid pace even when Wall Street was tearing it up alongside the housing bubble in the early part of the 2000s. Yet these businesses clearly had demand for lower cost centers. As we now all know, the entire first half of the decade was one giant debt bubble but real incomes were going nowhere but sideways. Once the illusion popped the unraveling became apparent.
The 99 Cents Only Stores also largely make profits by selling food:
This also ties in with families waiting at Wal-Mart near midnight so their debit cards will be refilled with funds to purchase food during the end of the month. These businesses are simply catering to a new environment but you wouldn’t know it by watching the mainstream press. You would think that many of these stores still only sell trinkets and junk. If you walk into these places you will see name brand food and goods now being sold and taking up nearly half of the location.
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5 Comments on this post
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MrsB said:
The dollar store is not the better bargain when it comes to food. I routinely purchase tuna @ 2 cans/$1.00 at the local grovery store. Cats loved tuna and pet food is not covered under food stamps. Some soups are also a better bargain as are chips and crackers, laundry and dishwashing soaps – cleaning products can often be substituted with bubble bath, which is a great way to clean cat liter boxes, sinks, toilets and bathtubs, while adding a pleasant smell to the bathroom, instead of a harsh chemical solution. And one of the best bargains is any kind of greeting or borthday/holiday card – at 2/$1.00 it’s a great savings, and on quality card stock. One thing that seems to have disappeared from the Dollar Store shelves is yarn, which at $1.00 per skein is a huge savings. Please bring yarn back!
July 20th, 2011 at 4:43 am -
CLARENCE SWINNEY said:
DOLLAR TREE
BEST BUY IN TOWN I COMPARE TO WAL-MART NO CONTEST
BREAD –SAME $1.00 VS $2.24
5 HR ENERGIZER $1 — $3 AT W-MART
1,=5v BATTERy–SAME BRANDS SAME BATTERY
$1 $3 wal mart Two For $7.25 at Office Depot
Our Dollar Tree is largest in chain.Great buys just check it out
Independent consumerJuly 20th, 2011 at 5:58 am -
Maya said:
Along with the dollar stores, thrift and resale stores are booming. Some recovery. /s
July 20th, 2011 at 12:29 pm -
Uncle B said:
Deeper thought: These stats lag the reality of the former Middle Class in America, where good solid working stock with pride and ambition, full time jobs, careers, trades, even professions, have been reduced, first to part-time temporary workers, renting, no mortgages possible and second hand cars only, further reduced: to totally disenfranchised, shanty town dwellers, rooming house folk, street people, rail riders, without credit, without assets, without even addresses, without even Third World medical care. American financiers have lost a great American asset, a perishable commodity in this world, and will live to regret it, once the Chinese communists, the really smart financiers turn on them, screw them, break them, even all the while robbing them of what remains of America, Latin America even Canada, where even Alberta’s Premiers (Tar Sands Province) plan to import Chinese Thorium fueled LFTR reactor technologies, not American nuclear reactors, and especially after the Fuckoshima fiasco that still unfolds even today, we can hardly blame them.
Dollar Stores, with cheaper household goods are just frost on the window-panes! Whole Chinese technology, nuclear LFTR technology reactors fed on Thorium, into the heart of the biggest oil find ever? The Alberta Tar Sands? Rumors of Russian built ice-breakers to open the North West Passage, so Canadian iron ore, coal, oil, compressed natural gas, chromium, Lithium, wheat, rye, hemp products can be sent to a hungry and rich Asia willing to pay in stable, coveted, solid, and unmanipulated Yuan, in place of the U.S. dollar, the one with the Fed’s “thumb on the scales” for every deal done in U.S.currency, every deal done with American business people?
Canadians look forward to Chines cars, washers dryers, refrigerators, televisions, utensils, even medicines. We all shop Walmart for cheaper Chinese manufactured products. We are relatively a poorer people, more practical, live closer to the earth, and tend to suffer terribly cold winters, that keep us honest. Our Dollar Stores do really well and we love them. We never had a gloriously wealthy Middle Class to begin with, so no lose for us, these Dollar Stores!July 21st, 2011 at 1:36 pm -
Old Jules said:
I buy a lot of my essentials from Dollar Tree and Dollar General and I agree with a lot of what you’ve said. I’m seeing a lot more traffic, particularly in Dollar Tree, than in the past. Dollar Tree limits every item they carry to a dollar, whereas prices are climbing a bit with DG and they’re losing some of their appeal.
But there’s also thrift stores. Salvation Army, St. Vincent de Paul, Habitat for Humanity, that sort of thing, my nearest town has eight, everything used, and every stitch of clothing, footwear, headgear I wear came from them. My chicken house is built from glass shower doors bought for a dollar each from Habitat for Humanity. I’ve got a 1940s vintage Kenmore clothes washing machine I use here picked up from St. Vincent de Paul for almost nothing because it didn’t work, but was repairable by me. A 5 inch telescope sits on my porch for stargazing picked up for $5 from Salvation Army because it didn’t have any eyepieces, which I eventually provided from another thrift store. My toaster oven, my breadmaker, my food processor I use to shred prickly pear cactus for chicken feed, all came from thrift stores at prices no higher than $5.
But my point is, the type of people visiting those is also changing, not the slow progress of watching a child grow, but by leaps and bounds.
July 23rd, 2011 at 4:05 pm