Jul 2

Discount Retailers Benefit as Customers Seek Value

Stephen Bierman
Oct 12, 2020

Image: Fix Price

Discount retailers are thriving as the pandemic driven economic downturn drives customers away from luxury and towards value.

Poundland, Dollar Tree, Five Below and the like are booming according to the latest information available. Retail sales were up by almost 1 percent, above expectations of a 0.5% increase in September, according to Redbook. Department stores remain weak as consumers favor discount stores and online shopping. 

Redbook projects a 2.5% gain in October, with sales sparked by mid-fall and Halloween apparel, winter sports and early holiday merchandise. The Redbook Index measures year-over-year same-store sales growth in a sample of large U.S. retailers, representing about 9,000 stores.

Coronavirus lockdowns and job losses earlier in the years have dried up income streams for large swathes of consumers. The result has been a change in shopping habits towards finding the best price. 

The trend no different in emerging markets in former Soviet Union. Countries like Russia and Kazakhstan which lean on energy businesses experienced double hit, as the the price of oil and natural gas crashed with virus-halted travel. That has supported stores offering value.

Fix Price, Russia’s largest variety value chain that also operates in Belarus, Kazakhstan and Uzbekistan, beat the previous year with 20.6% like-for-like sales growth in the third quarter. 

“We continued to see additional support for the variety value retail segment on the back of growing price awareness among customers and higher demand and consumption of goods at more affordable prices,” CEO Dmitry Kirsanov said in a release accompanying the results.

In food retail, X5 Retail Group, is starting to test a discounter retail format.

The trend shows that consumers are increasingly demanding the cheapest price for the desired service. They are looking for something that might be described as “the EasyJet option” or the cheapest route from A to B, without any of the frills or “experience.”

While air traffic may be in pain well into next year, the non-food retail world appears to value its discounters more than ever. 

Stephen Bierman

Stephen Bierman is a finance and energy reporter with over 15 years of experience, including at Bloomberg News and Energy Intelligence.

Tweets at: @StephenBierman1

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