Magazine article Newsweek

Cheap Thrills for Shoppers: Why Discount Stores Are Suddenly the Height of Fashion

Magazine article Newsweek

Cheap Thrills for Shoppers: Why Discount Stores Are Suddenly the Height of Fashion

Article excerpt

Lori Coleman always considered herself a bit of a fashion plate. She has a closet full of outfits by Ralph Lauren and Tommy Hilfiger, bought at her favorite department store, Dillard's. But with relentless headlines about layoffs and stock-market chaos, the 42-year-old Akron, Ohio, health-care executive is shopping someplace new: Wal-Mart. "It was so hard to walk in there," says Coleman. "But the economy is scary and I'm trying to conserve." Much to her relief, Coleman spied friends at the big discounter. "As long as everybody else is doing it," she says, shrugging.

Welcome to retailing's hottest trend: trading down. After the worst Christmas season in five years for the $750 billion retail industry, shoppers are cautiously returning to the aisles. But, in the lingo of merchants, they're "down-shopping," gravitating to bargain-basement retailers like Wal-Mart, Target and Kmart. New spring fashions have gone begging at department stores and specialty retailers like the Gap and AnnTaylor, chains where sales are off more than 10 percent this year. In contrast, sales at discount stores have increased 4.4 percent this year, almost double the rate of retail sales overall. With all the pocket-book anxiety lately, even discounters aren't enjoying the heady growth of a year ago. But they are increasingly becoming a safe haven to buy everything from toilet paperto capri pants. And warehouse clubs like Costco and Sam's Club, which feature a variety of bulk goods at cut-rate prices, are doing even better, with sales jumping by 6 percent. Even the no-frills, $1 stores that cater to low-income consumers with inexpensive basic merchandise are attracting more well-heeled shoppers. More than half of U.S. households shopped $1 stores in the past year, according to AC Nielsen.

The purveyors of cheap chic are moving quickly to take advantage of newly frugal shoppers. Wal-Mart is snatching up the credit-card customers of bankrupt Montgomery Ward, while Target will soon affix its bull's-eye logo to 35 old Ward's locations that it acquired last month. …

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