Frugality spans all incomes and changes marketplace

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 secondhand 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.”

Changing clientele

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 secondhand 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.

Clothing trend

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, which customizes dress shirts for a much lower price – $120. As for his suits, he’s turning to outlets.

The Paramus store is one of 100 new locations for the nonprofit Goodwill. Many are in middle-class suburbs. The strategy: Attract not only people in need, but also the many Americans who are looking for more value when they shop. Revenue this year is up 11 percent.

A similar scenario plays out on Manhattan’s Upper East Side, where wealthy women who tend to frequent high-end boutiques are increasingly showing up at consignment shops looking for designer brands like Chanel and Gucci for less.

Merchants respond

To fight back, some retailers are adding consignment to their stores. In the tony Boston suburb of Winchester, Mass., upscale clothing merchant T. Michaels began offering consignment a few months ago as a way to make up for weak sales. Locals drop off high-end clothes in pristine shape – some even have the tags still attached. When the shop sells them, the two split the profit.

Two years ago, having secondhand clothes in the same store that sells regular-priced goods might have driven well-heeled shoppers away. Today, the concept works. The new consignment area, called My Secret Closet, has brought in new customers. Shoppers browse both the retail and consignment areas without hesitation.

“We are seeing a permanent change in how people shop, and we have to respond to that,” said Tom Patrolia, who has owned the store for 24 years.

The growth in layaway also reflects Americans’ new willingness to set aside old shopping stigmas. Layaway, which lets shoppers pay over time while the store holds the item, had its roots in the Great Depression. It became passe in the past two decades with the rise of credit cards.

Toys R Us expanded its layaway program this year after seeing strong demand last holiday season. Two years ago, it didn’t exist. Now customers are using it to pay for outdoor gym sets, bicycles and baby-related goods such as cribs and changing tables.

Shoppers at Davis Jewelers in Louisville, Ky., used to be embarrassed when the sales help would suggest layaway for engagement rings, which start at $3,000, said saleswoman Erica Samelson. Now more shoppers are asking to pay through layaway because they can’t rack up big balances on their credit cards or get bank loans.

“For the first time, I am hearing lots of people bringing it up,” she said.