2 out of 3 Americans have adopted a habit that's killing department stores
Discount stores are crushing department stores as a growing number of Americans refuse to pay full price for anything.
Consumers started gravitating toward discount stores during the recession, and many have failed to return to shopping in full-price stores.
Off-price buyers now account for two-thirds of all consumers, according to a new study by industry research firm The NPD Group.
Their buying activity has hit the clothing market the hardest. Off-price buyers are "hardcore apparel purchasers," representing 75% of apparel purchases across all retail channels, according to the study.
That's bad news for department stores like Macy's, Nordstrom, and Kohl's. All three retailers have off-price brands, but they make less profit off of their discounted apparel, and sales are sliding at their full-price departments stores.
Macy's same-store sales fell 7.4% in the most recent quarter, Nordstrom's fell 1.7%, and Kohl's dropped 3.9%. Shares of Macy's and Nordstrom have lost about 50% of their value in the last year, and Kohl's stock price has fallen 40%.
Marshal Cohen, chief industry analyst for NPD, said in a statement:
"Off-price retailers are resonating with fashion and cost-conscious consumers alike, and are stealing department store business for good reason. Off-price is second only to the online channel in terms of growth rate."
Shopping visits made to off-price retail stores increased by 4% in the 12 months ending April 2016, compared to the same period last year, according to the study.
"Consumers are clearly looking for better deals and they know if they shop at an off-price retailer they will get them. Apparel shoppers are finding just what they want at off-price retailers at the right time and at the right price, and that isn't always the case with department stores."
Off-price buyers are a difficult group to attract and retain because they are not very loyal to any single brand, NPD said. They tend to shop at multiple off-price retailers as well as other retail outlets.
In addition to seeking discounted merchandise, consumers overall are also starting to save more money while splurging less on clothes, shoes, and other fashion items, studies show.
When consumers do shop, they are spending their money on "big-ticket" items like cars, houses, and electronics over clothes and shoes.