The Dollar Channel - US

Published by: Mintel International Group Ltd.

Published: Jul. 1, 2009 - 85 Pages

Table of Contents

SCOPE AND THEMES

What you need to know

Definition

Data sources

Sales data

Consumer survey data

Advertising Creative

Abbreviations and terms

EXECUTIVE SUMMARY

Recession drives frugal consumers into dollar stores

Dollar General and Family Dollar dominate the channel

Channel use on the rise

Incidence of buying food on the rise but cleaning products still in high demand

Bargains, convenient locations and time savings all drive visitation

Frequent shoppers driven into the channel by the “thrill of the hunt”

Blacks more likely to shop channel

MARKET SIZE AND FORECAST

Key points

Dollar store sales growing, despite the recession

Figure 1: Total U.S. retail sales by dollar stores, in current terms, 2004-13

Figure 2: Total U.S. retail sales by dollar stores, in inflation-adjusted terms, 2004-13

COMPETITIVE CONTEXT

Supercenters compete directly with dollar stores for value-oriented customers

Figure 3: Proportion of households purchasing CPGs, by channel, 2007 and 2008

Figure 4: Share of CPG sales, by channel type, 2002-08

MARKET DRIVERS

Key points

Most customers are from low income brackets, but incidence of affluents shopping at dollar stores is on the rise

Figure 5: Number of households that shopped at Dollar General or Family Dollar in past four weeks, by household income, 2008

Blacks and Hispanics heavy users; low incomes drive demand

Figure 6: Median household income, by race of householder, 1997-2007

Low level of consumer confidence driving dollar store sales

Figure 7: Consumer sentiment index, 2001-09

Increase in numbers of dollar stores helps to drive sales growth

Figure 8: Number of stores operated by leading companies at year’s end, 2004-08

Figure 9: Reasons for not shopping more frequently at dollar stores, by age, April 2009

Figure 10: Reasons for not shopping more frequently at dollar stores, by age, April 2009

Perception of low quality and a preference for other stores are primary barriers to use

Figure 11: Reasons for not shopping more frequently at dollar stores, by age, April 2009

LEADING COMPANIES AND BRAND SHARE

Key points

Companies with the classic dollar store concept are growing in recession while other discount retailers struggle

Figure 12: Dollar store sales, by retailer, 2002-08

Most stores report sales of $2 million per year or less

Figure 13: Dollar store sales, numbers and square footage, top eight brands, 2008

Dollar General

Figure 14: Category sales at Dollar General, 2006-08

Figure 15: National map of Dollar General locations, 2009

Family Dollar

Figure 16: Category sales at Family Dollar General, 2006-08

Figure 17: National map of Family Dollar locations, 2009

Dollar Tree

Fred’s Inc.

Figure 18: National map of Fred’s Inc. company-owned and franchised store locations, 2008

99¢ Only Stores

Figure 19: Category sales at 99¢ Only Stores, 2006-08

Figure 20: Map of 99¢ Only Stores locations, 2008

Big Lots

Figure 21: Category sales at Big Lots, 2007 and 2008

Duckwall-ALCO

Figure 22: Category sales at Duckwall-ALCO, 2008 and 2009

Figure 23: Map of Duckwall-ALCO locations, 2008

INNOVATION AND INNOVATORS

Dollar stores for the affluent: 99¢ Only Stores on Wilshire Boulevard

Redesigning the customer experience: Family Dollar’s “Concept Renewal”

Moving from single to multi-price point retailing: The Dollar Tree “Oops” and Deal$ models

ADVERTISING AND PROMOTION

Many use prices more than ads and gimmicks to attract customers

Some companies making greater use of the internet

Dollar General and Family Dollar both partner with Kimberly-Clark on the Room a day Giveaway

Figure 24: Dollar General’s Kimberly-Clark and The View Room a Day Giveaway, 2009

Figure 25: Family Dollar and The View Room a Day Giveaway and website promotion, 2009

Fred’s pitches customers with a Caribbean theme

Figure 26: Fred’s “How low can you go?” ad, 2008

Big Lots appeals directly to value-conscious women shoppers

Figure 27: Big Lots getting bags of stuff for less than $20, 2009

CHANNEL USAGE

Key points

Incidence of visit to market leaders rose slightly between 2007 and 2008, as the recession gripped the nation

Figure 28: Trended incidence of Dollar General and Family Dollar visits in past four weeks, 2005-08

Most respondents reported shopping at dollar stores once per month or more

Figure 29: Demographic comparison of dollar store use, April 2009

Food channels shopped more frequently, especially in recession

Figure 30: Incidence and frequency of use for food channels, by age, April 2009

Figure 31: Incidence and frequency of channel use at stores that do not specialize in food, by age, April 2009

CATEGORY PURCHASE

Key points

Frequent shoppers are driving sales growth; more likely to shop across categories

Figure 32: Incidence of category purchase at dollar stores, April 2009

35-44 year olds more likely to report purchase in popular categories

Figure 33: Incidence of purchase of personal care, kitchen cleaning and kitchen supplies at dollar stores, by age, April 2009

Figure 34: Incidence of purchase of food and other home supplies at dollar stores, by age, April 2009

REASONS FOR SHOPPING AT DOLLAR STORES

Key points

Savings and convenience are the primary drivers of use

Figure 35: Reasons for shopping dollar store channel, by age, April 2009

Figure 36: Reasons for shopping dollar store channel, by income, April 2009

RESPONSE TO RECESSIONARY PRESSURES

Key points

Dollar store shoppers, especially frequent shoppers, more likely to report changing in response to recession

Figure 37: Effect of recession on shopping behavior, by frequency of dollar store visit, April 2009

GENERAL SHOPPING ATTITUDES

Key points

Frequent dollar store users enjoy shopping and often shop across channels

Figure 38: Attitudes toward shopping, by frequency of dollar store use, April 2009

Figure 39: Shopping enjoyment, by dollar store shopper, October 2007-December 2008

Figure 40: Shopping with family, by dollar store shopper, October 2007-December 2008

Young adults more likely to shop for fun, shop across channels and shop with family

Figure 41: Attitudes towards shopping, by age, April 2009

RACE AND ETHNICITY

Key points

Blacks and Hispanics are a key element of the target market

Figure 42: Incidence and frequency of dollar store use, by race/ethnicity, April 2009

Spanish speakers have lower incomes, greater need for dollar stores

Figure 43: Income distribution of Spanish-speaking and English-speaking Hispanics in the U.S., October 2007-December 2008

Blacks are more likely to purchase consumables at dollar stores when compared with other race/ethnicity segments

Figure 44: Incidence of category purchase, by race/ethnicity, April 2009

Figure 45: Incidence of category purchase, by race/ethnicity, April 2009

Affinity for shopping among blacks and Hispanics drives use of dollar stores

Figure 46: Attitudes towards shopping, by race/ethnicity, April 2009

Blacks more likely to choose channels based on both price and convenience

Figure 47: Incidence and frequency of shopping within channels that specialize in food, by race/ethnicity, April 2009

Blacks and Hispanics somewhat more likely to report changing behavior in response to recessionary pressures

Figure 48: Influence of the economy on shopping, eating and transportation habits as compared to last year, by race/ethnicity, April 2009

APPENDIX: ADDITIONAL AGE COMPARISONS

Figure 49: Incidence of Dollar General and Family Dollar use in the past four weeks, by age, October 2007-December 2008

Figure 50: Number of visits to Dollar General in the past four weeks, by age, October 2007-December 2008

Figure 51: Number of visits to Family Dollar in the past four weeks, by age, October 2007-December 2008

Figure 52: Incidence and frequency of dollar store use, by age, April 2009

Figure 53: Influence of the economy on shopping, eating and transportation habits as compared to last year, by age, April 2009

APPENDIX: ADDITIONAL INCOME COMPARISONS

Figure 54: Incidence of purchase of personal care and cleaning items at dollar stores, by income, April 2009

Figure 55: Incidence of purchase of food and other home supplies at dollar stores, by income, April 2009

Figure 56: Incidence and frequency of use of channels that specialize in food, by income, April 2009

Figure 57: Incidence and frequency of use of channels that do not specialize in food, by income, April 2009

Figure 58: Incidence of shopping at Dollar General or Family Dollar in the past four weeks, by income, October 2007-December 2008

Figure 59: Number of visits to Dollar General in the past four weeks, by income, October 2007-December 2008

Figure 60: Number of visits to Family Dollar in the past four weeks, by income, October 2007-December 2008

Figure 61: Incidence and frequency of dollar store use, by income, April 2009

Abstract

During this time of recession, consumers from across demographic segments are shopping at dollar stores in greater numbers. One important effect of this shift is the fact that the middle-class and affluent segments are shopping the stores in greater numbers. However, it remains to be seen whether these relatively well-heeled consumers will return to their old shopping patterns after the recession ends and thus it is important that dollar store marketers work to optimize their customer retention efforts. One way to retain customers is to conduct customer satisfaction surveys designed to gather information that will help them optimize their offering while also communicating the notion that the stores care about the opinions of customers.

It is also evident that young adults are shopping in dollar stores in sufficient numbers to make targeted efforts to attract and retain these customers, important both practically and potentially lucrative. Creating brand loyalty at a young age can result in a life-long customer. It is equally clear that many young adults are avid users of social networking sites. This indicates that building and maintaining spaces on social networking sites such as Facebook and even Twitter could be an effective way of reaching this valuable segment while maintaining dialogue that helps ensure the brand remains top of mind. Given the typically low cost of such initiatives and the importance of creating strong brand relationships with customers, it seems quite evident that most or all dollar store chains can benefit by increasing their social media and social networking efforts.

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