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Dollar stores used to appeal only to low-income customers, but this dismal economy is helping to make cost-conscious consumers of us all.

Shoppers who are better off financially than the low-income households that these retailers have traditionally catered to, are increasingly finding their way to these discount centers, according to “The Dollar Store Consumer,� a report released in August by market research firm ACNielsen. Much of the analysis draws on data from the ACNielsen Homescan Panel, a nationally representative panel composed of 61,500 households in the U.S. that continually provide information about their purchases across all outlet types using an in-home scanner.

Dollar stores are one of the fastest growing retail channels in terms of sales and number of stores. By 2002, there were over 13,000 such emporiums, three times the number in 1993, with combined sales over $13 billion. And further growth is expected as dollar store retailers expand from their rural and small-town roots with new marts opening in urban and suburban outposts. Nearly two-thirds of households (62 percent) now shop at dollar stores.

These businesses are no-frills retailers that offer basic household goods and merchandise at low price points — usually a dollar, but sometimes as much as $20. Considerable shelf space is devoted to high use, high turnover categories such as paper products, household cleaners, health and beauty aids and food and beverages. Groceries represent the largest single department, while non-food items account for 73 percent of total dollar sales.

The ACNielsen report finds that dollar store shoppers are more likely to include consumers from rural households, who are less educated and in the low-income category. Blue-collar households account for more than one-third of sales volume. Not surprisingly, households with five or more members or children under age 18 are overrepresented among dollar store customers. While lower-income households are more likely to shop at dollar stores, the retailers have seen growth in household penetration across all income groups (see chart, this page).

Just who are the best shoppers at these outlets? The majority of dollar store sales (83 percent) is driven by heavy shoppers who represent one-third of the customers. They made an average of 27 trips in 2002, compared with light shoppers at these marts who made just two trips over the same time period. And the heavy shoppers spent $12.98 per trip, over $7.00 more than light shoppers.

Since product selection can have a big impact on consumer shopping behavior, ACNielsen identified the mega-categories that would make the best demographic fit with dollar store heavy shoppers by comparing the demographics of this group with those of various product segments. These shoppers are more likely to spend on staples, such as sugar, ready-to-serve packaged foods and eggs. According to Todd Hale, senior vice president of Consumer Insights at ACNielsen, these heavy shoppers represent a market that can be further cultivated by devoting more shelf space and merchandising support to the categories they favor. By getting them to spend more per trip, dollar stores could ultimately reduce the number of trips these shoppers make to competing retail channels and take a bigger bite out of the sales of other stores.

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