Discount stores are slowly dying.
Yesterday, Dollar Tree announced it would buy Family Dollar, a chain that is in the process of closing hundreds of stores and firing workers.
Other discount stores have been struggling as well, writes Heidi Moore at The Guardian. Fashion discounter Loehmann’s filed for bankruptcy, while Wal-Mart’s sales have declined for the past five quarters.
“There’s just not enough money deployed by American families to keep all the discount chains in business,” Moore writes.
Dollar stores saw their heyday during the recession, when middle-class shoppers came to buy smaller, cheaper packages of household necessities like toilet paper.
While middle-class shoppers have enjoyed economic recovery, America’s poorest consumers have not, write Paul Ziobro and Shelly Banjo at The Wall Street Journal.
Money spent by households earning less than $US30,000 has been flat since 2008, WSJ reports, citing the Bureau of Labour Statistics.
Total income for that group fell 1% between 2004 and 2012.
The merger of Dollar Tree and Family Dollar could further crunch Wal-Mart, according to WSJ.
With 13,000 stores between them, the new dollar store will be in a better position to negotiate lower prices from suppliers. This could challenge Wal-Mart, which is already more expensive than dollar chains.
But it’s possible that no amount of discounting will win back these struggling shoppers.
“A cash-strapped consumer can’t keep buying forever, no matter how low prices go,” Moore writes.
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