Business

Dollar stores ruling retail sales, with all incomes fueling surge

Rebecca McGee shopped at a 99 Cents Only store in Berkeley, Calif., for gifts for the children she teaches. "I don't have the finances to shop at my favorite Target and Wal-Mart," she said.
Rebecca McGee shopped at a 99 Cents Only store in Berkeley, Calif., for gifts for the children she teaches. "I don't have the finances to shop at my favorite Target and Wal-Mart," she said. MCT

BERKELEY, Calif. — Dollar stores are expected to be among the star retail performers this holiday season, according to a Nielsen survey.

"There is no stigma from going to a dollar store," said James Russo, Nielsen's vice president for global consumer insights. "It's frugality. It's practicality. It's convenience."

Dollar stores "have been doing better during the last three years and continue to do better throughout the year and during the holidays," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consultant. "These places are eating Wal-Mart's lunch."

Not surprisingly, price is a big reason for that. "I don't have the finances to shop at my favorite Target and Wal-Mart stores," said Rebecca McGee of Berkeley, Calif.

McGee, a 25-year-old educator, started shopping at dollar stores two years ago after a stint of unemployment. "Now, I'm just budgeting myself a whole lot more."

Dollar stores typically carry a wide variety of merchandise, most of which is priced at, well, a dollar. There are household cleaning supplies, kitchen supplies, beauty products, pet supplies, seasonal merchandise, groceries and frozen foods. Many also carry fresh produce.

Even before this holiday season, dollar stores have been doing quite well. For the third quarter, Dollar Tree's same-store sales were up 4.8 percent compared with a year ago, while Wal-Mart's same-store third-quarter sales rose 1.3 percent and Target's third-quarter same-store sales were up 4.3 percent. Third-quarter figures have not been released for 99 Cents Only Stores, but for the second quarter, same-store sales were up 6.7 percent from a year ago.

Affluent households — those with yearly household income of more than $100,000 — are helping to drive sales growth. Still, the largest share of money spent at dollar stores comes from people with household incomes of $50,000 or less.

"It's still tough going," said Barbara Kahn, marketing professor at the Wharton School of the University of Pennsylvania. "And it's going to be tough until we see unemployment go down."

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