The Homa Files

TakeAway: As people make fewer costly shopping trips to stock their pantries and increasingly can only afford inexpensive items in small quantities, stores are scrambling for the once-ignored low-end customer.

Some customers at Wal-Mart and the major dollar chains have such modest budgets that the retailers report upticks in spending at the beginning of the month, when government benefit checks and many paychecks come through.

Some of the stores have even managed to reach some middle-income shoppers, by increasing products from well-known brands such as Hanes, Quaker Oats and Nabisco. 

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Excerpted from the New York Times, “Stores Scramble to Accommodate Budget Shoppers” By Stephanie Clifford,September 22, 2010

Dollar stores have shown the biggest gain in shopper visits over the last year out of all the retailers that sell basic consumer goods. Manufacturers are racing to package more affordable versions of products common at those stores, and other budget retailers, feeling the loss of customers, are trying to duplicate their success.

 Wal-Mart, the world’s largest retailer, is adding thousands of items to its shelves, including inexpensive ones, and is asking dollar-store suppliers to create small, under-a-dollar packages for its stores, too.

 In areas with high unemployment, Wal-Mart is grouping together its less than $1 items in a clear challenge to the dollar stores. About a quarter of Wal-Mart’s stores are beginning to offer items for under $1, such as a four-pack of toilet paper, boxes containing just a few garbage bags and single rolls of paper towels.

The dollar stores have best been able to capitalize on the downmarket trend because of strategies they embraced during the recession, when the stores kept things cheap and expanded their merchandise.

During the recession, Wal-Mart pulled back on very inexpensive products, suppliers said, to make the stores look less cluttered and to appeal to shoppers who might be testing out that retailer instead of, say, Target. That decision has it now playing catch-up.

The dollar stores have found creative ways to keep their prices low. When commodity costs rose for suppliers, for example, the dollar stores asked them to decrease the number of sandwich bags in a box or pushed them to come up with a cheaper version of the products.

Edit by AMW

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Full Article:
http://www.nytimes.com/2010/09/22/business/22dollar.html?_r=1&th&emc=th 

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This entry was posted on October 8, 2010 at 6:18 am and is filed under Mktg - Positioning, Mktg - Product Line Mgnt, Retailing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.