With some analysts predicting consumer behavior will be forever-changed after this past economic recession, dollar store and single-price point concepts may stand to benefit even as many consumers begin to spend more freely.
“An analyst at my firm recently surveyed about 1,800 dollar store customers and asked them questions about how they were feeling about their current economic situation, would they trade out of the dollar store space if things got better, those kinds of things,” said Patrick McKeever, a senior analyst at MKM Partners LLC, who covers Dollar Genera (DG), Family Dollar (FDO), Dollar Tree (DLTR) and 99 Cents Only (NDN), in addition to several off-price retailers.
“What she found was that a very small percentage of these core dollar store customers actually intended to trade out of the space as the economy improves; it’s only about 4%,” McKeever said. “The vast majority said that they would spend the same or spend more at the dollar stores in a recovering economy.”
Because McKeever believes the U.S. will see a moderate economic recovery in lieu of strong growth, he predicts those consumers who traded down to discount store concepts in the heart of the recession will spend more at these stores rather than trade out.
“Consumers are spending less at the stores. So as we start to see an improvement in jobs growth, I think you’ll see the average ticket start to rise across the different areas of retail that I cover,” McKeever said. “And even if the traffic diminishes, I think the growth in average ticket will offset it.”
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