Thriving discount stores

Thriving discount stores are bucking the retail apocalypse trend. Retail is in a constant state of flux with E-commerce disrupting every aspect of retail but for thriving discount stores there might be another story.

Thriving discount stores could explain an underlying trend playing out in the retail space

Tradition, middle-class retailers are experiencing the retail apocalypse and this could be due to more than just the “Amazon effect” described as the ongoing evolution and disruption of the retail market.

Thriving discount stores could be due to what Darren Winters coin’s in a piece entitled the “Brady Bunch Trade”, dated January 2015. Back in the 70s, a working man, even blue collar, could afford to maintain a family, a wife and six kids. Middle-class jobs supported the consumer economy, the retail boom, and local families too.

Fast forward to today and thriving discount stores could be cited as evidence of the hollowing out of the middle class

Thriving discount stores

Wealth inequality is so distorted today that already 1% control more than half of the World’s wealth. Moreover, that figure is expected to rise by two thirds by 2030.

So this unequal distribution of income and wealth not only creates polarised politics it is also distorting consumption patterns. In other words, the retailers for the poor boom as the once middle class downsize, to discount stores. Meanwhile, middle-class retailers go bankrupt and the luxury retailers for the ultra-rich boom.

Recent data from the Institute of Local Self-Reliance underscores the boom of discount stores (also known as dollar stores in the US)

“Although most dollar stores sell no fresh food and only a limited selection of packaged foods, the two major dollar chains are now feeding more Americans than Whole Foods is”, wrote ILSR.

Thriving discount stores might be good news for corporate profits and Wall Street but less so for the community

The ILSR report writes that thriving discount stores worsen inequality by extracting wealth from vulnerable communities.

“Profits from Dollar General are going back to their corporate office, not to the community,” writes ILSR. Thriving discount stores could invite a political backlash.

So the middle of the road retailers continue to struggle, luxury is booming with Ferrari experiencing record sale boom in 2018 and the seafaring super rich splashed $2.9 billion on superyacht last year. Meanwhile, way down the food-chain discount stores are thriving too.

From a traders/investors perspective these turbulent retail times can be summed up in a few words; Go long the poor and ultra rich and short the middle.

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