High profits for low-end retailers

Costco store

TEXT OF STORY

Kai Ryssdal: To review, we've got MasterCard saying it's going to be earning more money than it thought it would and Costco telling us its profits rose 32 percent. Throw in the fact that Big Lots, the country's biggest close-out retailer, saw profits jump 20 percent and whaddya get?

Why, you get this story from our senior business correspondent Bob Moon.


Bob Moon: Today's numbers are a clear indicator of how the soaring costs of essentials like gasoline, food and housing have rapidly escalated from a cause for worry to an outright shift in consumer behavior.

Ken Perkins: Clearly, it looks like the consumer continues to trade down to more value-oriented retailers here.

Ken Perkins heads the marketing research firm Retail Metrics. He says it's no mystery why the big warehouse chains are all doing good business in the face of the slumping economy.

Perkins: Part of the attraction for a BJ's or a Costco or a Sam's Club is the fact that it can be a one-stop shop. You can buy your gasoline there, you can get your groceries there, you can get apparel, other home necessities there at a relatively decent price and in bulk if you need it.

Likewise, the appeal of Wal-Mart, Big Lots and other discounters is obvious. Consumer behavior analyst Britt Beemer says saving money has become the top priority. More of us are clipping coupons and scrimping in all kinds of ways.

Britt Beemer: Consumers are migrating to almost what I consider to be a bare-bones strategy. You now have, for example, 67 percent of consumers who are negotiating lower prices in stores when they can -- double from the normal 33 percent a few years ago. 59 percent of consumers out there are making lists prior to shopping in stores so they can stay focused to buy what they need to buy. So consumers are going to do what they can to be able to pay their bills.

Does that mean it's the end of the world for Sears and other department store and specialty chains? Beemer says not necessarily, as long as they can figure out how to give customers what they want: Lower prices and big discounts.

In Los Angeles, I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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