Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

[c1ue]

http://online.wsj.com/article/SB1000...314201664.html

Sales and profit growth have started to slump at the deep-discount retailers called dollar stores, after a robust performance during the recession, a sign that even fairly cheap toys and other small indulgences now are a stretch for some consumers.

In the past several weeks, Dollar General Corp., Family Dollar Stores Inc. and Dollar Tree Inc., the country's three largest chains that sell sharply discounted food, household staples and other items in modest-size stores, all have missed their quarterly earnings targets.

All three retailers cited transportation costs due to rising diesel-fuel prices as a major reason for their earnings shortfalls. ...

[touchring]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

http://online.wsj.com/article/SB1000...314201664.html

A lot of items sold by dollar stores are really junk, non-essentials. On the other hand, luxury goods stores such as GUCCI and PRADA seem to be doing very well.

[flintlock]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

Yeah, there's only so many times you can sell stale crackers before even poor people stop buying it. I love Big Lots, but I forbid my wife from buying food there or at places like it.

But seriously, gas prices haven't helped retail in general. Recreational shopping, even for cheap items, is becoming a thing of the past for many. I try to buy everything I can online now. Not only do I save 50 cents a mile driving back and forth, but the prices are usually better also. Food is about the only thing we still drive to buy on a regular basis. Amazing how you can buy items sent directly from China cheaper than at the local CVS.

[GRG55]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

A lot of items sold by dollar stores are really junk, non-essentials. On the other hand, luxury goods stores such as GUCCI and PRADA seem to be doing very well.

And luxury goods are "essential" are they?

I think you miss the real economic point...

"...All three retailers cited transportation costs due to rising diesel-fuel prices as a major reason for their earnings shortfalls..."

What is happening here is that transportation costs are material part of the total cost of many of the low value goods that Dollar stores sell. And since most of these goods are imported, rising transportation costs to move them over the vast distances between point-of-manufacture and point-of-sale are translating into quite significant percentage price increases. Fuel costs are not a material part of the total price of a Rolex watch made in Switzerland and sold in NYC, or a Prada handbag, or...

So I would expect that we are unlikely to see Rolexes made in the USA any time soon, but as fuel costs rise due to Peak Cheap Oil we will see USA production of essentials and non-discretionary goods, closer to its large end market, gradually revive because of the currency and fuel cost advantage over China et al.

[touchring]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

And luxury goods are "essential" are they?

I think you miss the real economic point...

"...All three retailers cited transportation costs due to rising diesel-fuel prices as a major reason for their earnings shortfalls..."

What is happening here is that transportation costs are material part of the total cost of many of the low value goods that Dollar stores sell. And since most of these goods are imported, rising transportation costs to move them over the vast distances between point-of-manufacture and point-of-sale are translating into quite significant percentage price increases. Fuel costs are not a material part of the total price of a Rolex watch made in Switzerland and sold in NYC, or a Prada handbag, or...

So I would expect that we are unlikely to see Rolexes made in the USA any time soon, but as fuel costs rise due to Peak Cheap Oil we will see USA production of essentials and non-discretionary goods, closer to its large end market, gradually revive because of the currency and fuel cost advantage over China et al.

Well, it depends on the ability of retailers to jack up prices. Here in Singapore, prices of everything, basic, essential, non-essentials, have all been rising like nobody's business since the beginning of this year. No one is stopping it and there's a radio silence imposed by government controlled media.

As for Rolex watches, do you know that the retail price of luxury watches have gone up by almost double since 2004? By the way, retail prices of Rolex watches in Asia is a third more than the USA.

http://precisiontime.blogspot.com/20...increases.html

By 2004, the Submariner Date would cost you US$4,250, or the equivalent of US$5,054 today. Today, the current incarnation of the stainless steel Rolex Submariner Date, is listed at US$8,000.

Since 2004, the price increases which used to be intermittently made every few years is now a yearly affair. Cost of entry into the Rolex world is made more difficult every year as it climbs higher and higher in in the luxury watch food chain.

[zoog]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

...Amazing how you can buy items sent directly from China cheaper than at the local CVS.

I buy a lot of things online as well, for the same reasons. Yet I keep wondering, how long until that too is overwhelmed by transportation costs.

[touchring]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

I buy a lot of things online as well, for the same reasons. Yet I keep wondering, how long until that too is overwhelmed by transportation costs.

You can buy iceberg lettuces from the USA all over the world, they are air-flown - lettuce rots fast, very bulky for their weight. So is transportation cost really that expensive?

[GRG55]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

You can buy iceberg lettuces from the USA all over the world, they are air-flown - lettuce rots fast, very bulky for their weight. So is transportation cost really that expensive?

And who said the USA doesn't export anything... :-)

[don]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

I forbid my wife from buying food there or at places like it.

Question: Where do you find wives that take orders like this?

(MEGA, pay attention!)

[touchring]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

And who said the USA doesn't export anything... :-)

Although American love Chinese products, this is not the case in Singapore, many avoid Chinese products, especially food, Chinese iceberg sell at less than half the price of US iceberg for the same weight but more people seem to be buying icebergs from the US and other countries.

I heard in China, upper middle class people are willing to pay 10 times more for imported foods because they do not trust local produce to be safe for consumption.

[c1ue]

Re: Recovery or Next Step towards Riots: Dollars stores feeling the heat from the economy/transportation costs

What is happening here is that transportation costs are material part of the total cost of many of the low value goods that Dollar stores sell.

This is true, but I think doesn't go into enough detail.

The biggest impact on costs is actually local and intra-state ground transport.

Container costs are rising due to fuel, but are still very miniscule relatively speaking. However, shipping from ports to inland, or even ports to warehouse to local port city, is getting very expensive.

It is not clear that US manufacturing will necessarily help much especially given the significant wage differentials, nor is having 'self sufficient' cities much of an improvement.