With the continued horrible economic conditions that have become a norm to a vast majority of Americans, the populous has had to adjust their spending habits substantially. Americans now think differently when they walk into a store, compared to the thought process that once encompassed them, prior to the great recession. A majority of Americans no longer spend frivolously. As a investor you must evaluate what the masses are doing, where they are spending their money, who will set to profit from the new spending habits. The American consumer who was once willing to spend money anywhere, now has the responsibility instilled in their spending habits to shop name brand items at a discount.
The plays in this current environment are Ross Stores and TJX Companies. This move will reward those in a jungle of an economic situation that collapses for the next few years or a climate where we run head first away from an American slow-down. You sit there stumped, wondering how will this play work in both economic conditions? The answer comes simple and straightforward, the American consumers have changed their spending habits and will not be changing them back anytime soon. These “cheap” habits are now instilled in Americas arsenal of shopping weapons. If Americans are no longer forced to shop at discount retailers they will choose to do so freely. If the masses are forced to shop “cheap” due to economic conditions, as they have for the last few years, these stores will continue to profit as well. Why spend 50 or more dollars on a polo when you can pay a measly $30 for the same item. The above example is how Americans are thinking as they go shopping on Saturday, the masses methodology that can be applied to many name brands and items, be it furniture, kitchen appliances, shoes and so on. Call it wealth effect, call it nervousness, call it whatever you like, Americans are scared of being poor again (think 2008, think unemployed, etc.) so they will continually pinch pennies.
Many Americans have seen the dark side, living pay check to pay check, many Americans have lost a substantial portion of their net worth in their houses, they feel poorer. You can attribute the change in behavior to whatever you like, the reality remains the same, Americans will continue to be cheap and the discount retailers will continue this profitable trend from this behavioral switch.