Discounters Rise to the Top on Sales of More Upscale Items
By the end of the year, the company that built nearly $200 billion in sales on such mundane products as paper plates and lawn mowers will unseat General Motors Corp. as America’s largest company.
Wal-Mart Stores Inc.’s rise to the top isn’t just a sign of the retailer’s mastery of “everyday low prices,” powerful logistics systems and cutting-edge technology. It also reflects Americans’ continuing love affair with the discount sector, which is tapping into the increasingly sophisticated tastes of budget-conscious consumers. Discounters are also appealing more to upscale shoppers who just don’t want to spend a lot of money for certain items.
“Wal-Mart has given consumers a new and appealing connotation to value, and in the process raised the stature of discounting,” said Kurt Barnard, publisher of Barnard’s Retail Trend Report, based in Upper Montclair, N.J.
“Discounters used to be places to go because you couldn’t afford shopping anywhere else,” said Wendy Leibmann, president of WSL Strategic Retail, a consulting firm based in New York. “Now it’s a sign of a smart shopper.”
While the discount industry has been bruised by higher gasoline prices, it is expected to fare much better than department and specialty stores as the economy slows.
It’s attracting people like Jane McCarthy, a 36-year-old senior marketing manager from Yorktown Heights, N.Y., who calls herself a “discount queen.”
Each week, the mother of a 3-year-old shops at one of the nation’s three largest discounters. Target is her favorite because it has a lot of unique items, but she turns to Wal-Mart for toys and garden supplies. At Kmart, she buys Sesame Street clothing, and also gives kudos to its Martha Stewart Collection of bath accessories.
Over the past decade, the U.S. discount retailing industry has exploded into a $203-billion business, representing 9% of total retail sales, excluding autos. That’s up from $84 billion, or 5.8% of retail sales, in 1990, said Shelly Hale, an analyst at Banc of America Securities.
The discount sector is now twice the size of the department store business. Over the same period, department stores watched their retail share fall from 5.9% of sales to 4.4%.
Why the shift? For one, department stores’ deteriorating customer service has leveled the playing field with discounters, said C. Britt Beemer, president of America’s Research Group, a Charleston, S.C.-based market research firm.
And as discounters improve their selection, they make themselves more of a one-stop convenience for shoppers. Last year, for example, Wal-Mart unseated Toys R Us as the biggest seller of toys.
Discounters aren’t just appealing to consumers on price alone. Over the past couple of years, they’ve made it almost chic to shop at their stores, developing new brands and acquiring licenses.
