Dollar stores making a comeback

Dollar stores have picked up substantial new business as consumers seek bargains during the recession.

Even shoppers who still buy their shoes at luxury department store Neiman Marcus will head to a dollar store for generic items such as sponges or even brand-name goods like Coke, said Cheryl Holland Bridges, director of the Center for Retailing Studies at Texas A&M University.

The stigma has lifted from shopping at these stores, Bridges said.

“Dollar stores have been establishing their credibility with a much wider range of brand names and household products,” said Wendy Liebmann, chief executive of WSL Strategic Retail in New York City.

Family Dollar Stores spokesman Josh Braverman said customers are shopping at Family Dollar more frequently and generally spending more on each trip, he said.

“Our core customer is a single mom with kids at home, in her 40s or so, and makes about $40,000 a year or less,” Braverman said.

New customers, including those with higher incomes, also are buying at Family Dollar for the first time, he said.

“It’s probably driven by the need to save a little bit of money,” Braverman said. “The Tide that’s on our shelf is the same Tide that’s in the grocery store but a little bit cheaper.”

Prices at dollar stores are the cheapest or among the cheapest for many items, especially party and holiday supplies such as gift wrap and napkins, according to Consumer Reports.

But nearly 80 percent of items in dollar stores sell for more than $1, the magazine said.

Dollar Tree, for instance, sells everything for $1 or less. But Dollar General has items priced at 85 cents, $1 and $5.50 on the cover of a recent flier for a local store.

Family Dollar also sells items for multiple prices, including an iPod for $25 and a Guitar Hero 3 video game for $20 for the holidays, Braverman said.

But shoppers should beware of potential quality issues when it comes to buying electrical products, jewelry and medication at dollar stores, Consumer Reports said.

• Extension cords, lamps and other electrical products might have fake UL labels vouching for their safety. Undersized wiring or other substandard components can overheat and cause a fire.
• Millions of pieces of children’s jewelry have been recalled because of high lead content1. New laws limit the amount of lead allowed, but older products might still be on store shelves.
• Watch for expired or soon-to-expire medication and food products. Many dollar stores buy directly from suppliers, but they also get merchandise from closeout companies.
• Some dollar stores consider all sales final. Dollar Tree said on its Web site that it does not offer refunds, but it will exchange unopened items if the buyer has the original receipt and the items aren’t seasonal.

The Associated Press contributed to this report.

Dollar stores enjoying boom timesThe worse the economy, the better for retailers of deeply discounted items. Partly fueled by higher-income shoppers “trading down,” the popularity of dollar stores has risen sharply since the current recession began in December 2007.

According to a study done by the Nielsen Co., high-income shoppers spent 10 percent more at dollar stores in 2008 than in 2007.

Marie Bowers, 66, shops at the Family Dollar in the Sterling Park Shopping Center. The retired graphic artist said she could shop for food, household items, clothing and beauty products at a large grocery chain store, but she prefers the Family Dollar.

As a woman whose parents lived through the Great Depression in the 1930s, Bowers said she appreciates value.

Im a frugal, cost-conscious shopper, she said proudly. “This is my store.”

Stores like Family Dollar are seeing their stock prices holding strong as well. Dollar stores are often seen as “recession-proof” stocks, and shoppers like Bowers are helping keep stock prices up in the current recession. The stock price of Family Dollarthe nation’s second-largest dollar store chainis up 42 percent this year, not only bucking the 37 percent drop in the Standard & Poor’s 500 but ranking it as the top performer in the index.

For some shoppers, the appeal goes beyond prices to convenience and proximity.

Dollar stores have expanded beyond rural areas to more urban and suburban locations in recent years, and they have have moved aggressively into the food and beverage category by adding freezers and refrigerators.

These chains have also increased the number of stores accepting different payment types such as credit cards, electronic benefit transfer cards and food stamps.

Bowers said she likes shopping in a smaller store where the staff is easily accessible and the aisles are quieter and less crowded.

The people here are friendly and helpful, she says. They really do feel like family.