It's no secret that many shoppers at dollar stores are near or at the bottom of the economic ladder. Many of these same consumers take part in the Supplemental Nutrition Assistance Program (SNAP), which previously was known as the Food Stamp Program.
Today, dollar store chains such as Family Dollar welcome the growing numbers of SNAP consumers, knowing they have a significant effect on the chain's top and bottom lines.
According to a Dow Jones Newswire report, the federal government has expanded the the stamp program to provide for individuals and families hit hard by the economic downturn. Over 34 million low-income individuals are enrolled in the program, which saw participation jump by 21 percent in the last year. The government, which spent $6.1 billion for the year ending in May, is looking at expenditures as high as $15 billion this year, according to Pali Research.
MKM Partners analyst Patrick McKeever said Family Dollar has looked to expand its acceptance of electric payment cards used conduct transaction for the program. Mr. McKeever is looking for Family Dollar to see continued growth in same-store sales in part because of its participation in the program and expansion of food SKUs.
"We've seen over the last few years there is a need for more fill-in grocery trips," Family Dollar spokesperson Josh Braverman told the wire service. "It's not automatically a reaction to the recession. It's more of a long-term strategy for us to grow our food business ... People changed to buy what they need, not necessarily what they want."
Discussion Questions: Do dollar stores participating in SNAP have a competitive advantage over those that do not? Are there any downsides for retailers participating in government food subsidy programs?