Income inequality breeds greater income inequality

Because the poor get poorer, the rich get richer.

Let’s start with the backdrop: Essentially, the lower-income Americans that are the target customers of dollar stores have gotten too poor to buy anything other than food (a vivid illustration of Piketty’s point about income inequality). That has depressed margins and profits at these [Family Dollar and Dollar Tree] discount retailers.

So the people who own and manage these discount stores are going to end up hurting right? Hahaha, no, remember, the rich get richer.

The fact that these poor Americans—and the retailers that serve them—are doing so badly attracted the attention of some of the richest and best-connected investors in the world. Funds associated with the activist investors Nelson Peltz and Carl Icahn have snapped up significant chunks of Family Dollar in recent months—as has the hedge fund manager John Paulson.

And they have been pushing for a sale. Which makes sense, from their point of view: Combined, they stand to earn hundreds of millions on the deal, at least on paper. ...

Other people that stand to earn a tidy sum on the merger? Well, Family Dollar’s CEO Howard Levine owns roughly 8% of the shares outstanding, so the deal price would land him with paper gains of about $130 million.

So, more and more people have become so poor that they can't afford anything but basic subsistence. So rich people started stores to sell things to those people. And those rich people got richer as the poor people got poorer.

Looks like others have figured out Art Pope's business model.

Comments

And this explains

why Art Pope is getting into the grocery business.

From the original article:

the lower-income Americans that are the target customers of dollar stores have gotten too poor to buy anything other than food

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"What I see from the folks who are opposing our agenda is whining coming from losers." -- Thom Tillis

Right...they can't afford his cheap crap from China

they can barely afford food. This has nothing to do with providing a service and everything to do with protecting his bottom line.

Excellent catch, Posmo.



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Vote Democratic, the ass you save may be your own.

There's also ...

... the recent buy out of Family Dollar by Dollar Tree.

All of the dollar stores are finding themselves competing against Walmart, which is trying to go for the bottom end consumer as other parts of Walmart's business dry up.

More recently, however, sales at dollar stores have been suffering because the lower-income customers who go to them are facing persistent job instability and slow wage growth in the aftermath of the recession. Wal-Mart Stores Inc. and Kroger Co. also have been opening smaller store formats to directly compete with dollar stores. During its current fiscal year, Wal-Mart plans to open 270 to 300 smaller outlets designed to cater to shoppers looking for more convenience.

Of course, Art could just sell out the Variety Wholesalers chain to one or more competitors, keep the cash, and devote all his time to serving the citizens of North Carolina as Budget Director.