The once-strong economy has faltered due to the disruption caused by the coronavirus. People have cut their travel, mass gatherings are being canceled, and companies have held off on filling some open positions.
Market observers are wondering if the impact of the virus could send the economy into a recession. If that happens, however, some companies will thrive even as the overall economy struggles. These three businesses are built to weather a downturn, and should do well even as others struggle.
When times get tough, people look for bargains. Costco Wholesale (NASDAQ:COST) offers savings on groceries, and you can head to the warehouse club to stock your pantry and get an inexpensive meal in the food court. Costco members also get a bit of entertainment in exchange for their membership fee; it's fun to eat free samples and see what merchandise the chain has added, even if you don't plan to buy anything.
The warehouse club chain will also benefit from having inexpensive gas and offering a variety of other low-cost services. Members will visit more often and spend more money if times get tight because Costco offers significant value to its members.
Dollar General (NYSE:DG) offers very low-cost merchandise, and that includes groceries -- customers can buy food and household goods and meet other needs, often without having to go very far. The low-cost chain has been built to thrive when times get tough.
Dollar General isn't the principal place most people shop. It's generally more of a fill-in option. But in a recession, people may shop in smaller quantities more often, and that will benefit it.
Some 90% of Americans live within 10 miles of a Walmart (NYSE:WMT). That positions the low-priced chain to thrive during a recession. People still have to eat, get dressed, and meet basic needs in a downturn, and the discount retailer offers lower prices on things people need.
Walmart will also benefit from the omni-channel infrastructure it has built. The chain offers free two-day delivery and curbside pickup without charging extra for either. Both of those services will give it an edge during a recession.
It's good to be cheap
All three of these chains have one major thing in common: They offer low prices. That will be incredibly important in a recession. If people have less money to spend or are concerned that their financial situation may take a downturn, they will be looking for value.
These three brands have made offering low prices their identities. That's a smart way to market in a strong economy, and becomes even stronger in a recession. Costco, Walmart, and Dollar General will thrive during an economic downturn because they will not only serve their regular customers, but also people who need to save money because their personal economic situation has taken a turn for the worse.