Price-squeezed Americans are increasingly turning to discount stores, leading Dollar Tree and Dollar General to increase sales forecasts for the year.
Dollar General even plans to open 1,110 new stores during the 2022 fiscal year, while Dollar Tree is bolstering its supply chain to keep up with its own ambitious expansion plans, reported The Wall Street Journal.
However, considering the cold reception some municipalities give such discount retailers, what does their future hold? The Food Institute examines below.
PRICE CONSCIOUS SHOPPERS TURN TO DISCOUNT STORES
Inflation has started to squeeze middle-income households as higher prices hit big-box stores.
According to a report by Numerator, middle-income consumers with a yearly income of $40,000 to $80,000 recently overtook low-income shoppers as the group most affected by rising grocery prices, reported MarketWatch.
The Numerator data showed that middle-income shoppers spend more than other income groups on groceries at big-box retailers and dollar stores such as Dollar General and Family Dollar.
Dollar General said shoppers were purchasing more food and beverage products instead of apparel, home and seasonal products, while Dollar Tree noted shoppers were responding “favorably” to its new “greater value” products and its broader range of items priced at $3 to $5.
By contrast, Walmart and Target recently cut forecasts, citing inflation, inventory, and supply chain issues.
BATTLES WITH MUNICIPALITIES
Twenty-five municipalities across the country have put in place moratoriums on new dollar store openings, with lawmakers pointing to data that correlates the growth of small box retailers, the lack of healthy food choices and food deserts, reported Forbes.
However, some dollar stores have been adding produce departments to select locations in recent years. Dollar General, for example, currently offers produce in over 2,300 stores, and the company hopes to bring that to 10,000 over the next few years.
“Impressive – but that’s only about half of their stores – what about the rest? And what do low-income shoppers do until then?” wrote Phil Lempert, founder of The Supermarket Guru.
FOOT TRAFFIC DOWN
Foot traffic has not seen as much of a surge as sales.
“With inflation and gas prices hitting new highs in 2022, many consumers are cutting back on spending and shopping trips,” Jolene Wiggins, chief marketing officer at Gravy Analytics, told The Food Institute. “Although dollar stores are usually great options for those looking to stretch their budgets, the year-over-year decline in foot traffic to Dollar General, Dollar Tree, and Family Dollar locations suggests that even dollar stores are being impacted by the rising cost of living.”
Findings from Gravy Analytics show that, by the end of the first quarter of 2022, Dollar General, Dollar Tree, and Family Dollar saw declines of 21%, 20%, and 16%, respectively, compared to the first quarter of 2021.
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