The economy’s loss is the small retailer’s gain as more and more consumers are shying away from big box stores and seeking bargains closer to home, published reports say. As such, the bigger stores are starting to fight back. A recent story in The New York Times says “Walmart, 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. In areas with high unemployment, Walmart is grouping together its less than $1 items in a clear challenge to the dollar stores.” Tightening budgets, continued unemployment and a general economic malaise are all blamed for the shift. And it looks like shoppers are getting used to the change, with analysts divided as to whether they’ll go back to their profligate ways if and when the economy improves. Craig Johnson, president of New Canaan, CT based consulting firm Customer Growth Partners, told Businessweek that customers will become hooked once they see dollar stores have evolved. “They’ve become a new generation of convenience stores, not just a place to buy something on the cheap,” he says. But Maggie Gilliam, president of New York based retail consulting firm Gilliam & Co., disagrees. “Most people don’t aspire to shop at dollar stores,” she says. “As soon as they feel better economically, they’ll return to their old stores.”
Still, tight money persists, and consumers are more carefully watching their bottom line. “People are literally running out of cash on hand as the month goes on and they’re looking for smaller package sizes,” Johnson told the Times. “They may have $10, $20, $30 to spend getting toward the end of the month, and they have to be able to still feed the family and get diapers and so forth.” And it looks like retailers large and small will have to stay creative to keep the customers coming through the doors. “Most Americans are in a much better financial position than a year ago, but they are still spending cautiously, looking for bargains and comparing prices before buying,” says National Retail Federation President and CEO Matthew Shay. “After leveraging aggressive promotions to bring in back to school shoppers, retailers are putting the finishing touches on promotions and pricing for the upcoming holiday season.” Whether those touches pay off remains to be seen.