Study: Dollar stores may benefit from increased payroll tax

Chicago -- A new Symphony Consulting survey found that the new 2% increase in payroll tax is causing a major shopping behavioral change among lower-income families.

A division of SymphonyIRI Group, Symphony Consulting revealed Monday that dollar stores may be the biggest winners in the battle for the lower-income spenders’ purchasing power.

“To date, shifts in shopper behavior are subtle, but patterns are emerging that deserve close and ongoing scrutiny,” said managing director of Symphony Consulting, Dr. Krishnakumar Davey. “Our initial analysis offers highly current data on shopper behavior that will form the basis for ongoing research into the impact of the payroll tax increase.”

The study found that while total dollar sales in food and beverages were nearly the same from the end of 2012 to the start of 2013, discretionary spending was down, private label spending was up and dollar stores were gaining a greater share of consumer spend, all possible outcomes of the higher tax.
The growth rate among middle-income shoppers decreased slightly (40 basis points). There was no significant change among high-income shoppers. Contradicting expectations, dollar sales growth among low-income shoppers increased, albeit by a small percentage (50 basis points). This could be attributed to increased in-home consumption versus eating out.

Dollar sales growth of several categories exhibited declines, including in snacks (down 230 basis points) and beverages, such as coffee and tea (2-110 basis points). Cooking ingredients and beverages, such as juices and drinks, on the other hand, showed growth. Despite across-the-board over-performance in the first four weeks of 2013, discretionary categories lagged total food and beverage in the last week of January 2013, with dollar sales growth of 1.9% compared with 2.5% for the category as a whole in the same period. This could be due to the end of month effect when households optimized their grocery spending as a result of shrinking wallets.


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