Thursday, June 1, 2017

"The Dollar Store Economy"

"The Dollar Store Economy"
by mybudget360

"The death of retail is a very real thing. Amazon and other online retailers are simply shifting the way people shop in dramatic fashion. Yet you have to realize that Amazon does have a minimum buy for free shipping and not everything is rock bottom cheap. Also, food is still marked up on Amazon so if you are on a tight budget this will not work. So what are Americans to do? Many are opting to shop at rock bottom priced stores like Dollar General.  Really cheap items and food. The basics. What is telling is that Dollar General, the king of dollar stores accounted for a stunning 80 percent of new store openings in the US. While other retail outlets are dropping like flies Dollar General is growing to fit a new niche: the millions of broke Americans that still need food and need cheap goods.

The dollar economy: Traditional retail is going through an extinction event. Online retailers are taking them to task. This model was predicated on people doing the same thing as they did in the past but they are not. Americans are too broke to buy a home so buying big ticket items are not going to happen in the way they did in the past. Also, Americans would rather eat out than buy groceries should they have disposable income.
The number of stores closing is rather stunning:
Look at the list above. The graveyard of old retail is telling:

RadioShack: 550 stores closing
Payless: 400 stores closing
Crocs: 160 stores closing
K-Mart: 109 stores closing
Sears: 41 stores closing

Go to any mall and you will see stores having rather big sales. 50 to 60 percent off seems to be standard. You even get the feel that stores are having a tough time. Americans have decided to shop in a very different way and this is going to impact millions of people given that retail is one of the largest employers in the country:
Click image for larger size.
The most popular job in the US isn’t manufacturing but working in retail. In other words, the top employment sector is one in which things are sold, not made. And these are extremely low paying jobs with most not having retirement or health care plans. Most young Americans are broke and have no money saved. Hence the rise of the dollar economy.

So while many stores are closing, Dollar General seems to be doing well. Dollar General accounts for 80 percent of all new store openings. While the list of stores closing is startling, Dollar General is in growth mode. Dollar General is up 218% over the last decade and has a market cap of nearly $20 billion. And when you look into Dollar General, it looks like a mini Wal-mart:
People may be broke but not broke enough to give up on the dollar store economy."

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