Dollar Stores are winning amid COVID-19

Dollar stores have been one of the best-performing retail channels amid COVID-19. Dollar General and Dollar Tree both reported year-over-year sales growth exceeding Walmart’s, and Five Below is planning to open 110 to 120 net new stores this year.

Dollar has consistently attracted the largest share of shopper foot traffic

When it comes to share of foot traffic to the whole food retail market, Dollar has consistently outperformed other channels like Supermarket and Club, and continues to be up around +10% year over year.

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Why? Shoppers are increasingly value-conscious

In an ongoing survey of the general population that we've been fielding since March, we ask our panelists, "Why did you choose the retailer that you did?" The top two choices by a wide margin have been convenient location and best prices. With a footprint of over 31,000 stores nationwide and a total focus on value, the Dollar channel is meeting both needs.

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Existing Dollar customers are increasing trips and basket size

While many retailers have seen declines in transaction volume due to trip consolidation, Dollar is an exception. Sales are up due to year over year increases in transactions and basket size.

However, Dollar isn't attracting adoption by new customers - they're flat year over year when it comes to Penetration (percentage of consumers that have shopped at these retailers).

Among Dollar's existing customer base, though, spend per capita has increased significantly. It appears that shoppers are leveraging Dollar for a broader proportion of their needs compared to pre-COVID, especially things like stock-up trips.

DMAs in which Dollar growth has been especially strong include South Florida and NYC; these are DMAs where Dollar has historically been weaker. This growth among urban areas is a more recent phenomenon during the COVID era.

Which shopper segments are moving to Dollar?

Below we've plotted the composition of Dollar visits during COVID-19 across Sense360's behaviorally-based segments. 

Early on, Dollar benefitted from the fact that its core shopper base - lower income, blue collar segments like Busy Budgeters and Hardworking Homebodies - were largely adhering to their normal work routine, compared to more affluent shoppers.

And now, Dollar continues to sustain its growth despite the fact that the more urban and affluent segments that are now driving growth - like Urban Influencers and Affluent Adopters - are not Dollar's core shopper base. 

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Now that affluent, white-collar segments are venturing back out into stores at a greater scale, Dollar has been able to attract these shopper segments and successfully sustain its growth.

Dollar has seen a larger share of its visits coming from Urban Influencers, Social Suburbanites, and Affluent Adopters - all of whom are increasing their share of visitation to the market overall.

 

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Penetration is flat year over year, which means there isn't a net increase in the number of people in the population who have gone to Dollar stores. So the increased share from affluent consumer segments could mean that there's a decrease in visitation from blue-collar segments, or that urban / affluent types are visiting more frequently - even if the number of people hasn't increased.

 

Which retailers are winning in terms of spend?

While all dollar chains are performing well now, Dollar General continues to outperform its competition in terms of shopper spending.

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Dollar Tree experienced significant declines early on in COVID but has since recovered to be performing more in line with its competition. This likely has to do with its assortment (not much food, which would have been critical earlier in COVID with trip consolidation and out of stock concerns).

Another factor that likely contributed to Dollar Tree's earlier declines is geographic footprint - the retailer skews more towards urban and the west coast than its competitors.

And as we see below, urban DMAs and the West region were hardest-hit in terms of total volume of retail shopper foot traffic.

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Overall, Dollar stores were well-positioned to take advantage of shoppers' increasing focus on convenient location and value, use of stimulus checks to stock up on essentials, and shoppers' willingness to switch to other stores to fulfill their needs during COVID-19. 

It remains to be seen whether Dollar will sustain this growth when COVID-19 subsides, but the consumer economy is unlikely to bounce back from the damage of the pandemic quickly.