Strapped shoppers turn to thrift stores, bargain brands

PARAMUS, N.J. — The Goodwill store in this middle-class New York suburb is buzzing on a recent weekend afternoon. A steady flow of shoppers comb through racks filled with second-hand clothes, shoes, blankets and dishes.

A few years ago, opening a Goodwill store here wouldn’t have made sense. Paramus is one of the biggest ZIP codes in the country for retail sales. Shoppers have their pick of hundreds of respected names like Macy’s and Lord &Taylor along this busy highway strip.

But in the wake of the recession, the stigma attached to certain consumer behavior has fallen away. What some people once thought of as lowbrow, they now accept — even consider a frugal badge of honor.

And it’s not just about Goodwill. Americans, even those with jobs, are shopping for brands, buying at stores and eating at restaurants that they shunned before because they are trying to get more for their money.

At the supermarket, shoppers are buying more store-labeled products, like no-name detergents and cereal, and not returning to national brands.

And in a telling trend, Americans are turning to layaway more often when they buy expensive items such as engagement rings and iPads. The wealthy are also using layaway more often, a drastic change from the past.

“The old stigmas are the new realities,” says Emanuel Weintraub, a New York-based retail consultant. “Now, people don’t have a problem saying, ‘I can’t afford it.’ It’s a sign of strength.”

At the Goodwill in Paramus, even financially secure shoppers are showing up. One is Heather Dzielinski, from nearby Ramsey, N.J., who had donated things to Goodwill but never shopped at one of its stores until the Paramus location opened in July.

A pair of L.L. Bean fur-lined slippers for $8, far below the $50 retail price, got her hooked. She thought a Goodwill store would be dark and dingy, but it wasn’t.

“This store is a lot different than what I thought it would be, and that impressed me,” Dzielinski said during a recent visit. She picked up two shirts for her son costing about $4 each.

Thrift and consignment stores are thriving, so much so that some high-end retail stores are carving out space for second-hand goods as a way to offset weak sales of their full-price merchandise.

This behavioral shift is pronounced at the nation’s supermarkets. Store-branded groceries now make up 22 percent of total sales, up from 20 percent before the recession, according to The Nielsen Co. The private-label business is worth $500 billion a year, so even a 2 percentage point change means $10 billion.

Improved quality has helped drive the growth, but price also plays a big role. Supermarkets that stock almost all store-brands are thriving. One is Aldi, a chain of more than 1,000 stores in the Midwest and on the East Coast.

At an Aldi location in Chicago on a recent evening, shoppers didn’t care that the only recognizable brands were the Splenda sweetener, a Butterball turkey and a few kinds of candy.

Six no-name grocery items — macaroni and cheese, potato chips, cream cheese, sour cream, olive oil and guacamole — cost about $10. The same six brand-name items cost $22 at the nearby Dominick’s.

“I started realizing that I could save $20 shopping here for my groceries, and I liked the products,” says Aline Silberg, a mother of two who works as a massage therapist and started coming to Aldi during the recession. “I stopped caring that they weren’t brands I knew.”

People are learning to live with trading down on clothes, too. Jaime Palmer of Dallas used to go to Neiman Marcus and spend as much as $300 on dress shirts by such high-end designers as Hugo Boss and Thomas Pink.

Now, Palmer, a 36-year-old a managing partner at an investment boutique, buys from a new label called J. Hilburn, an online store that customizes dress shirts for a much lower price: $120. As for his suits, he’s turning to outlets.

“You don’t get the service. They don’t bring you coffee,” he concedes. “It did have a bit of a stigma for me.” But living through the recession has made him reassess how he shops, he says.

“All of a sudden you feel mortal,” he says. And even though business has stabilized and Palmer’s own personal portfolio has rebounded, “my spending patterns will probably be a lot more conservative for the rest of my life.”

Last in a three-part series.