American shoppers haven’t entirely given up on retail.
On Thursday, Dollar General Corp. and Dollar Tree Inc. both reported sales growth and higher traffic. And executives from the companies said they plan to expand their selection of discretionary products — those shoppers want but don’t need — like seasonal party decorations, home goods and beauty products.
Shoppers are “back to work for the most part,” said Dollar General CEO Todd Vasos on Thursday, “Probably feeling a little more confident and spending a little bit more on her non-consumables,” like seasonal merchandise and home goods.
The strategy is a sign that they are confident their core low-income consumers will continue to have extra spending power in the foreseeable future and will use it in their locations. Their customers typically come from households earning about $40,000 per year.
Dollar stores have been a bright spot almost continuously since the recession, with the two largest chains adding thousands of stores.
Their results this quarter contrasts with those from traditional apparel retailers like Gap Inc. and L Brands Inc. and department stores including Macy’s Inc. and Nordstrom Inc. which disappointed investors.
“We are part of what I consider, in this economic environment, the most attractive sector in retail,” said Bob Sasser, chief executive of Dollar Tree, the second-largest dollar store chain after Dollar General.
Compared with big-box competitors like Wal-Mart Stores Inc., dollar stores are smaller and located in neighborhoods closer to homes. They sell a combination of basic staples, like rice and beans and toilet paper, along with “treasure hunt” products like party decorations or children’s toys, often in smaller package sizes with low prices. Big consumer products companies have worked to create more products that can be sold within the fast growing format.