Fresh Food, Health Care Likely to Spur More Dollar Store Growth

Of the approximately 7,300 U.S. stores opened, or planned to open in 2020 and 2021, 43% are dollar stores, according to Coresight Research.

Dollar General opened 1,000 new stores in 2020 and has 1,050 more planned for 2021. Dollar Tree, which owns Family Dollar, added about 500 new stores in 2020 and plans on opening 600 more this year, reported Money.com (Aug. 30).

Additionally, foot traffic at Dollar General is up 32% from pre-pandemic levels, outpacing even Walmart (3%), according to Placer.ai.

Some shoppers complain that prices are often more than $1, while critics say dollar stores are bad for the neighborhoods where they operate. So, why is the segment rapidly expanding? The Food Institute takes a closer look.

WHY ARE DOLLAR STORES BOOMING?

Inflation and disproportionately high job losses among low-income workers are boosting dollar store growth, reported The Seattle Times (Aug. 22).

The pandemic has ushered in an influx of new shoppers, including those who had previously been able to buy in larger quantities at big-box chains. Executives at Dollar General say they began seeing a rise in new customers last March when most of the country began shutting down. Interestingly, the chains newest shoppers tend to skew younger, have higher incomes, and are more ethnically diverse, according to a spokeswoman Crystal Luce.

Additionally, dollar stores are likely to see even more of a sales and earnings boost from the Biden administration’s plan to hike food stamp benefits, reported Reuters (Aug. 25). The USDA said that as part of a plan to promote a more nutritious diet among Americans, it is raising average Supplemental Nutrition Assistance Program (SNAP) benefits by more than 25% versus pre-pandemic levels.

Dollar stores run thousands of outlets that are walking distance from shoppers who use government assistance to buy food.

At the same time, inflation is pressuring America’s dollar stores, reported The Financial Times (Sept. 1). Increasing freight costs and wage expectations have raised questions about whether stores like Dollar General and Dollar Tree can meet their aggressive growth goals.



THE PUSH INTO FRESH FOOD

The new SNAP benefits will boost the segment’s strategy to tap into the fresh food market.

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Dollar General in particular has been diversifying its produce offerings as of late. The chain has previously been criticized for offering a limited selection of healthy food options like fresh fruit and vegetables, reported CNBC (July 7).

The chain currently has fresh produce in more than 1,300 stores — or roughly 7% of its total stores. It has said it may expand that assortment to up to 10,000 stores.

Family Dollar also started selling apples, oranges, onions, potatoes, and other fruit and vegetables, as well as frozen poultry, pork and beef at approximately 100 of its more than 7,000 stores this summer, reported CNN (June 2).

MOVING INTO PHARMACY

In addition to healthier food, dollar chains are now offering health care services. Dollar General revealed plans in July to become a health care destination by adding products such as cold and cough medication and dental supplies to its shelves. The chain also hired its first chief medical officer, Dr. Albert Wu.

During the company’s second quarter earnings call, CEO Todd Vasos said the company is eyeing services that rural America doesn’t have access to, such as eye care, telemedicine, and prescription delivery to stores, reported The Wall Street Journal (Aug. 26).

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