Consumers Shift from Walmart to Thrift Stores

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Second-hand shops once considered the bottom-of-the-barrel for shoppers are getting a boost as consumers living the great recession discover better inventory and bargains.

"A lot of what I wear never costs more than $2," says shopper Patrice Williams. Williams is a part of a growing trend that has shoppers forfeiting inexpensive threads from discount chains for used garments at second-hand stores.

Wal-Mart, the world's largest retailer, saw comparable store sales decline by 1.5 percent year-to-date, according to investment research firm Morningstar. Meanwhile, its competitor Target had a soft third quarter with comparable store sales up only slightly by 1.6 percent, according to Morningstar.

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On the other hand, the thrift shops are enjoying an expansion of sales and customers.

"Our transaction growth has grown by over 30 percent over the last two years but the bulk has been over the last year," says George Erickson, the Salvation Army's Northern California Director of Retail, based in San Francisco. "All of these extra transactions had to come from some place -- it's my conclusion that all these customers have stepped down from the Kohl's, Marshalls, TJ Maxx, Macy's and Nordstrom."

Since the start of the recession that has led to more than 8 million lost jobs, The Salvation Army has seen sales grow from $499 million in 2007 to $542 million in 2009.

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The creator of "Living Flying on Dime," Williams turned to "thrifting," or second-hand shopping, after she was unable to afford an outfit for an induction ceremony at her university. "I considered not going because I had nothing to wear," says Williams. While trekking through the city, Williams stumbled upon a thrift store, and shelled out $15 for a bag of clothing.

But, as thrift shops take one measured step up the social ladder, large retailers should not begin to agonize.

"I don't see how Wal-Mart can react or compete or even attempt to compete with the Goodwill's of the world that are selling used merchandise," says Matt Arnold, a consumer analyst at Edward Jones based in St. Louis. "The current softness is just a trend of their core demographic, which are lower-income consumers that take a longer time to pay down debt because they don't have the income. It's going to take time for core consumers to come back."

The big-box retailers will be in good shape as the country emerges from the worst downturn since World War II. "Wal-Mart has a battled tested strategy that has worked," he added.

Thrift stores are attempting to shed the stigma of buying used goods and adopting better customer service strategies. "I learned that the public has a certain perception of what a thrift store is and what the customers look like," says Erickson. "Through merchandising and how our stores look, I try to get as close to how a regular department store looks so people stepping down could check out thrift stores and have a positive customer experience."

"A lot of people that were once donors, we're now seeing as clients," says Lieutenant Chris Powell at the Salvation Army in LaGrange, Georgia. The small community has been hit hard by the economy and unemployment has hovered above 13 percent at times.

The organization that reinvests in the communities it serves has seen donations taper off as people attempt to make their goods last longer and old monetary donors become customers.

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