Can dollar stores survive an economic recovery?
byMay 27th 2010 1:00PM
Msnbc.com recently reported that Wall Street analysts are predicting a decline in business for dollar stores as the economy improves. Why? People forced by the bad economy to check out dollar stores such as Dollar Tree and Family Dollar to make ends meet in lean times will revert to shopping at higher end stores as their financial outlook improves.
As the article notes, people who had never set foot in a dollar store before the recession were delighted with what they could buy for a buck. Even so, three years later, many remain leery of some food and medicinal items, among other things.
Dollar stores have long struggled with the perception that their goods are of lower quality and less trustworthy than products in other stores. Still, shopping at dollar stores has become more acceptable to the general public in the last few years and all of the major dollar stores have made a greater effort to concentrate on quality products and keeping the stores clean, which makes for a more enjoyable customer experience.It makes sense that people forced to shop at dollar stores because of the economic slow down will either continue to shop there even after the economic recovery in order to make the most of their resources, revert to old prejudices and abandon dollar stores as beneath their dignity or continue to shop there, but not as often. So, yeah, stores like Dollar Tree may lose some of their newer customers but analysts agree, dollar stores will be around for years to come because many North Americans are still struggling and still others have embraced thriftier spending habits.
Right now, dollar stores are still expanding into new territories, still making extraordinary profits. Dollar Tree's net sales for the first quarter this year were $1.35 billion, a 12.6% increase over the first quarter of 2009. Whether or not these numbers can be maintained after the recession remains to be seen, although realistically, that may not be possible.
For my part, though, whatever the economy, it doesn't make sense to pay $3 for the exact same thing you can buy for a buck at the dollar store. And after all, if a store is worth shopping at when money is tight, why would that cease to be true once you're cash flow improves?
Marlene Alexander is a freelance writer and dollar store diva. She writes tips and ideas for home decorating using only items from the dollar store.