There was a time when going to the dollar store was something that only a small portion of the population was willing to do. In large part, today’s dollar stores offer a completely different experience with open and airy locations, big-name brands and the convenience that shoppers need in order to fit that last-minute purchase into their busy lives.
Furthermore, recent economic slowdowns have caused shoppers at all income levels to become more cost-conscious and willing to head to their local dollar stores to search for a good deal. In fact, nearly 80% spend $11 to $50 every time they visit a dollar store. As a result, stores such as Dollar General, Family Dollar and Dollar Tree are seeing massive sales growth, a trend that is likely to continue in the future. These stores are capitalizing on this shift in buying behavior, and using targeted strategies to attract shoppers and grow their stores.
4 Key Strategies Driving Dollar Store Growth
Top dollar stores are leveraging a combination of strategies to drive their ongoing growth: targeting rural areas, providing a high level of convenience, optimizing their product assortment and remodeling stores to make them more appealing to a wide range of shoppers. Each strategy is specifically targeted to address their needs, and together they’re having a strong positive net effect on the growth of these discount shopping options.
1. Targeting Rural Areas
Opening stores in small towns throughout rural America has been a positive trend for dollar stores, particularly Dollar General. The dollar chain is expanding and targeting rural areas specifically to continue their strategy of placing stores in communities of 20,000 people or less – where more than 70% of their stores are currently located. It may be too difficult for Walmart and other large retailers to maintain their massive footprint in these areas, but the smaller-format of dollar stores has proven ideal for expansion in small locales. Shoppers appreciate having a store close by their home or on their way to work, and often don’t mind that there is a more limited selection than in larger retailers.
2. Increasing Shopper Convenience
One of the major attractions to dollar stores is their smaller size, allowing for shorter, convenient shopping trips. Dollar Tree locations, for instance, are relatively small at about 7,000 square feet, or roughly 15 times smaller than the average Walmart store.
With stores around 7,500 square feet and an average shopping trip that lasts no more than 10 minutes, Dollar General shoppers also appreciate being able to run in, find what they need and head on their way. And with more than 15,000 stores in 44 states and over 75% of Americans who live within five miles of one of its locations, the discount retailer is one of the closest, most convenient options for shoppers who need access to a few low-cost items.
3. Optimizing Product Assortment
Many dollar stores are expanding their product offerings in various categories to directly compete with grocery retailers and convenience stores. Many dollar chains, like Family Dollar and Dollar General, have already began offering groceries like milk, eggs and frozen dinners at a discounted price, but the latter is taking it a step further. Dollar General is making fresh foods accessible and affordable to discount shoppers, as it currently has about 425 stores that carry fresh produce and plans to add produce to nearly 200 remodeled stores in 2019. This has resulted in improved shopper traffic and spending for the retailer.
Beyond fresh produce, the dollar store has also added other product selections to appeal to more shoppers. They’ve included more brand-name products to shift quality perceptions among non-traditional shoppers – which has increased average transaction values. And they’re also rolling out an expanded assortment of better-for-you products to select stores, with a focus on high-protein and low-salt options. This trend towards offering fresh produce and healthier foods is a stark change to their previous line-ups of inexpensive treats and canned goods. As a result, Dollar General and other dollar stores have an opportunity to become destinations for healthy, grab-and-go options.
4. Remodeling Stores
The perception is that higher-income shoppers are likely to be turned off by the stereotypical “dollar store look” – close shelving, low lighting, few signs and a lack of organization. Dollar General, in particular, is doing something to combat that stereotype in the form of remodeling approximately 1,000 stores in 2018, upgrading more than 400 to a new “traditional plus” model that includes expanded perishables in their coolers. A key benefit of this upgrade is the ability to offer fresh produce to individuals without a full-size grocery store in the vicinity, as well as providing an attractive growth opportunity for the stores in upcoming years. In a recent conference call discussing the company’s financial performance, Dollar General leaders stated that this direction was the best use of capital to deliver on their brand promise – saving shoppers time and money – and it has already proven to drive baskets and trips with existing shoppers, while also attracting new ones.
The Future of Dollar Stores
To maintain their continuous growth and success, dollar stores must adjust their approach to changes and trends in the industry. Some are experimenting with new formats and growing their private label selection. Dollar General, for example, is introducing its DGX concept to attract Millennials in urban locations. This also supports its goal of opening another 13,000 U.S. stores on top of the existing 15,000. The retailer is also looking to add to its assortment of private label goods, which currently features 40 unique product lines.
Attracting convenience store shoppers who are looking for fill-in between trips to larger grocery stores has also proven to be an exceptional strategy for dollar stores to date, and one that they will continue to expand going forward. While convenience stores (c-stores) are struggling to maintain growth rates, discount chains like Dollar General are seeing significant gains year over year by focusing on innovation that attracts c-store shoppers.
And although these stores are expanding at a significant rate, they’re more likely to focus less on opening new stores and more on making existing stores work harder in the future. This includes increasing basket sizes and shopper conversions in these stores, which can be achieved through a number of ways. One rising trend is the use of personalized coupons, as digital coupon redemption volume increased by 67% last year in this channel. And Dollar General is already taking advantage of this preference with its DG GO! app.
While larger brick-and-mortar stores are feeling the pinch from online retailers and even closing, dollar stores are experiencing tremendous growth. By remaining small, enhancing their appearance and expanding their product offerings, these up-and-comers are stealing away market share from their larger counterparts. Much of this growth can be attributed to a strong understanding of the discount shopper’s needs and a willingness to shift models based on data and insights. Grocers and other physical retailers can find ways to leverage these strategies to achieve similar growth, while also attracting and retaining more shoppers.