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The Dollar Channel - US - July 2009

At the time of this writing, the country remains mired in a recession that began in December 2007. Throughout 2008, Americans made subtle and not so subtle changes to their shopping and spending patterns, which slowed growth at many companies and, more generally, the U.S. economy.

This has had a negative impact on most channels but many dollar stores, like supercenters, have posted considerable sales growth during the downtown. Q1 2009 results from large dollar store chains continue to indicate that these companies can do quite well in a down economy. As such, the channel has become more important to a variety of businesses such as the CPG firms that manufacture an increasing share of the products sold at these stores.

In order to provide insight into how the channel is evolving and how to appeal to dollar store customers, Mintel addressed the following questions in this report:

  • What are the annual sales of dollar stores in the U.S and how are they projected to grow in the future?
  • How are various economic and demographic trends in the U.S. impacting the channel?
  • What are the leading companies in the channel and what are they doing to succeed in the current economic environment?
  • What proportion of the population shop at dollar stores?
  • What are the most common reasons for shopping at dollar stores?
  • Why do some people avoid dollar stores?
  • What items are most commonly purchased at dollar stores?
  • What segments of the population shop at dollar stores the most and how is the demographic composition of the shopper base changing?

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Table of contents

  1. 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
                                • Insights and Opportunities

                                  • Surveys and social networking efforts can invite loyalty that encourages new and infrequent customers to continue shopping dollar stores after the recession
                                    • Emphasize bargains on name brand products to appeal to a broad spectrum of consumers, including the middle class
                                      • Create a fun, clean, wholesome customer experience
                                        • Offer more fresh food to appeal to Baby Boomers
                                        • Inspire Insights

                                            • Saving Your Soul
                                            • 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
                                                                                    • Cluster Analysis

                                                                                        • Dollar Store Devotees (38%)
                                                                                          • Infrequent Shoppers (36%)
                                                                                            • Quality Seekers (25%)
                                                                                              • Figure 49: Dollar store shopper clusters, April 2009
                                                                                              • Figure 50: Incidence and frequency of use, by dollar store shopper clusters, April 2009
                                                                                              • Figure 51: Incidence of purchase of items at dollar stores, by dollar store shopper clusters, April 2009
                                                                                              • Figure 52: Reasons for shopping dollar channel, by dollar store shopper clusters, April 2009
                                                                                              • Figure 53: Attitudes towards shopping, by dollar store shopper clusters, April 2009
                                                                                              • Figure 54: Reasons to increase the amount of shopping at dollar stores, by dollar store shopper clusters, April 2009
                                                                                              • Figure 55: Influence of the economy on shopping, eating and transportation habits as compared to last year, by dollar store shopper clusters, April 2009
                                                                                              • Figure 56: Dollar store shopper clusters, by gender, April 2009
                                                                                              • Figure 57: Dollar store shopper clusters, by age, April 2009
                                                                                              • Figure 58: Dollar store shopper clusters, by income, April 2009
                                                                                              • Figure 59: Dollar store shopper clusters, by race, April 2009
                                                                                              • Figure 60: Dollar store shopper clusters, by Hispanic origin, April 2009
                                                                                          • Custom Consumer Groups

                                                                                              • Rural families who live simple lives and enjoy outdoor activities are among the most frequent shoppers at leading companies
                                                                                                  • Figure 61: Custom consumer groups with the highest incidence of use of dollar stores, by custom consumer group, October 2007-December 2008
                                                                                              • Appendix: Additional Age Comparisons

                                                                                                  • Figure 62: Incidence of Dollar General and Family Dollar use in the past four weeks, by age, October 2007-December 2008
                                                                                                  • Figure 63: Number of visits to Dollar General in the past four weeks, by age, October 2007-December 2008
                                                                                                  • Figure 64: Number of visits to Family Dollar in the past four weeks, by age, October 2007-December 2008
                                                                                                  • Figure 65: Incidence and frequency of dollar store use, by age, April 2009
                                                                                                  • Figure 66: Influence of the economy on shopping, eating and transportation habits as compared to last year, by age, April 2009
                                                                                              • Appendix: Additional Income Comparisons

                                                                                                  • Figure 67: Incidence of purchase of personal care and cleaning items at dollar stores, by income, April 2009
                                                                                                  • Figure 68: Incidence of purchase of food and other home supplies at dollar stores, by income, April 2009
                                                                                                  • Figure 69: Incidence and frequency of use of channels that specialize in food, by income, April 2009
                                                                                                  • Figure 70: Incidence and frequency of use of channels that do not specialize in food, by income, April 2009
                                                                                                  • Figure 71: Incidence of shopping at Dollar General or Family Dollar in the past four weeks, by income, October 2007-December 2008
                                                                                                  • Figure 72: Number of visits to Dollar General in the past four weeks, by income, October 2007-December 2008
                                                                                                  • Figure 73: Number of visits to Family Dollar in the past four weeks, by income, October 2007-December 2008
                                                                                                  • Figure 74: Incidence and frequency of dollar store use, by income, April 2009
                                                                                                  • Figure 75: Influence of the economy on shopping, eating and transportation habits as compared to last year, by income, April 2009
                                                                                                  • Figure 76: Attitudes towards shopping, by income, April 2009
                                                                                              • Appendix: Additional Race/Ethnicity Comparisons

                                                                                                  • Figure 77: Incidence and frequency of use of channels that specialize in non-food products, by race/ethnicity, April 2009
                                                                                                  • Figure 78: Reasons for shopping dollar channel, by race/ethnicity, April 2009
                                                                                                  • Figure 79: Attitudes towards shopping, by race/ethnicity, April 2009
                                                                                                  • Figure 80: Incidence of Dollar General and Family Dollar use in the past four weeks, by race/ethnicity, October 2007-December 2008
                                                                                                  • Figure 81: Number of visits to Dollar General in the past four weeks, by race/ethnicity, October 2007-December 2008
                                                                                                  • Figure 82: Number of visits to Family Dollar in the past four weeks, by race/ethnicity, October 2007-December 2008
                                                                                                  • Figure 83: Reasons for not shopping more frequently at dollar stores, by race/ethnicity, April 2009
                                                                                              • Appendix: Trade Associations

                                                                                                Companies Covered

                                                                                                • Facebook, Inc.
                                                                                                • Flickr
                                                                                                • Fred's, Inc.
                                                                                                • General Mills Inc
                                                                                                • Greenfield Online
                                                                                                • Home Textiles Today (HTT)
                                                                                                • J C Penney Company, Inc
                                                                                                • Kimberly-Clark Corporation
                                                                                                • Kmart Corporation
                                                                                                • Macy's, Inc.
                                                                                                • Starbucks Corporation
                                                                                                • The Conference Board
                                                                                                • Tuesday Morning Corporation
                                                                                                • Twitter, Inc.
                                                                                                • U.S. Bureau of Labor Statistics
                                                                                                • University of Michigan, The
                                                                                                • Walmart Stores (USA)

                                                                                                The Dollar Channel - US - July 2009

                                                                                                £3,199.84 (Excl.Tax)