Penny wise dollar not-so-foolish

Posted: 28 July 2014 in Uncategorized
Tags: , , , , , ,

dollar-tree-store-random-jpeg famdollar

What does it mean that Dollar Tree is buying rival discount store Family Dollar in a cash-and-stock deal valued at about $8.5 billion?

It means, at a first cut, that Family Dollar stockholders will receive $59.60 in cash and the equivalent of $14.90 in shares of Dollar Tree for each share they own—a transaction valued at $74.50 per share, which is an approximately 23 percent premium to Family Dollar’s Friday closing price of $60.66—and that Dollar Tree will now have more than 13,000 stores in the U.S. and Canada—nearly three times as many as Wal-Mart Stores Inc. (although Wal-Mart’s square footage is still greater).

More generally, it means there’s a lot of profit to be made in selling discount commodities to the low-income and falling-income American families whose numbers have grown over the course of the past three decades, and especially in the midst of the Second Great Depression.

As Sriya Shrestha explains in her recently published study of dollar stores,

US consumers experience a kind of “thirdworldization,” that marks them not as exceptional but rather increasingly on par with rest of world as they become yet another population of consumers marked by their lack of income. Hence, multinational corporations’ and discount retailers’ techniques aimed at incorporating what are known in marketing literature as the “bottom of the pyramid” (poorest populations in poorest countries) overlap with methods used at US dollar stores. For example, brand- name goods at the dollar store are often sold in packages substantially smaller than the standard sizes found at Target or CVS. This technique also surfaces in places like India where companies like Unilever and Proctor & Gamble sell single-serving sachets of laundry detergent, fairness cream, and shampoo for around 2 rupees. These methods rely upon a particular model of frugality aimed at those with extremely limited incomes that actually costs the consumer more in the long-run. This contrasts with other recently popularized methods of shopping, like purchasing in bulk from warehouse retailers and couponing that actually save money. These latter shopping styles require more money upfront, time, storage space, and membership fees ensuring its association with normative American middle-class, feminine “home-making” and smart budgeting rather than poverty.

Thus, the sense of loss of an American consumer identity and American dream emerges through the sense of a compromised American exceptionalism as people in the US find themselves unemployed, underemployed, facing compromised conditions of labor and consumption. Chinese Tide detergent and Indian Colgate toothpaste make their way to US dollar stores because major US and European multinationals are now targeting growth markets among the middle classes and poor in the former peripheries of the global economy as the centers have slowly begun to crumble.

Clearly, poor and working-class families are being forced to have the freedom to pinch their pennies, which turns out to be a profitable opportunity for the likes of dollar stores that feed at the bottom of American capitalism.

Comments
  1. […] as I’ve argued before, “there’s a lot of profit to be made in selling discount commodities to the low-income and […]

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