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SymphonyIRI: Payroll Tax Increase Favors Dollar Store Spending

Symphony Consulting, a business unit of SymphonyIRI Group, Inc., has completed an initial analysis of shopper behavior since January 1 when the United States federal payroll tax increased, and the numbers suggested a consumer purchasing shift that favored dollar stores. Sales growth for all channels remained constant at 2.1% the last four weeks of 2012 and in the first four weeks of 2013, but sales growth at mass merchandisers decreased to 3.3% from 5.3% in period with warehouse clubs registering a similar slow down.

Dollar stores seem to have added some business in the timeframe, Symphony concluded.

As the payroll tax increase kicked in, the sales growth generated from middle-income shoppers declined by 40 basis points, Symphony stated, while high-income shoppers kept spending at the same rate. However, sales growth among low-income shoppers increased a bit, in the 50 basis points, which the market research firm said could represent a shift toward eating at home rather than outside at foodservice establishments. In terms of spending patterns, discretionary product sales lagged behind food and beverage, Symphony noted.

For consumers living with a household income of $40,000, the 2% increase in the payroll tax represents $800 in reduced spending power per year. The decrease could be the difference between shopping at a lower-cost dollar store versus a mass merchandiser, increasing purchases of a store brand versus a national brand, or suppressing the urge to pick up a snack or other impulse purchase, Symphony pointed out.