A recent Report indicates that while many retailers are struggling, dollar stores, Walmart, and Target are thriving. The new research report also shows this is likely due to the growing buying power of low-income shoppers and their preference for these stores.

The Report

The Bank of America Merrill Lynch released the new research report. In April, purchases from low-income consumers grew 6 percent according to the report. Low-income consumers are those who make less than $50,000 annually. The increase is more significant than that of either upper- or middle-income consumers’ growth.

The Current Economic Attitude

According to the report, there is a high level of consumer confidence, even with the trade war with China. This confidence partially comes from low unemployment levels. This sentiment translates to low-income shoppers spending more.

The Discount Store Trend

In the research report, this is called the “discount store decade” due to the support for those low-cost retailers like Walmart, Target, and dollar stores. Experts predict that shoppers will continue to choose discount retailers and possibly increase their choice to shop there, especially given outdated shopping malls. As more stores close in malls, and malls themselves close, the report indicates that this will further benefit the discount retailers. After all, they will face less competition in the pool for shopping destinations.

Discount Stores Compared to Others

There is a clear trend away from the department store chains that shoppers used to buy at. It is no secret that Sears and JC Penney had to close numerous stores. There is also a decline in shopping at specialty chains focused on retail. Gap and Abercrombie & Fitch are having sales growth issues, while Forever 21 may need to restructure and Dressbarn is closing.

In comparison, discount retailers are doing well. So far in 2019, Dollar Tree’s shares have gone up 11 percent, Dollar General’s have gone up 20 percent, Costco’s have gone up over 20 percent, Target’s have gone up almost 30 percent, and Walmart’s are up 12 percent.

This is in sharp contrast to the 7,150 store closures U.S. retailers announced since the start of the year. Even major companies like Victoria’s Secret, Gymboree, Payless ShoeSource, and Charlotte Russe are not exempt. To put it in perspective, 2018 had 5,524 store closures, which was 30 percent less than in 2017. That year saw the all-time record, with 8,139 closures.

This recent report and the data within it clearly indicate that shoppers are moving towards discount stores, and if retailers want to remain competitive, they should take note.

Source:

https://www.cnbc.com/2019/06/05/this-is-why-walmart-and-target-are-thriving-other-retailers-arent.html

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