In the last five years, the growth of dollar stores and related derivatives has been nothing short of amazing. While growth has trended at record pace (see charts below), product developers, brand executives and smaller manufacturers often overlook this valuable retail distribution channel.
According to the Deloitte Dollar Store for National Brands study, only 40 percent of retail executives primarily working in grocery and mass merchandise viewed dollar stores as a strategic channel. This leaves a large opportunity gap for new CPG competitors and national brands alike to pursue dollar stores for potential growth and channel expansion.
Appealing to the Dollar Store Customer
During the Great Recession from 2009 through 2011, dollar stores saw a huge influx of new customers. In addition to their staple customer looking for quality at a discount, added traditional retail customers that were forced to keep a much tighter eye on budget. Many of the big dollar store chains, including Dollar General and Dollar Tree, strategized new ways to not only serve customers that were accustomed to purchasing national brand names, but also how to retain them post-recession.
Now, in 2015, dollar stores have really gone from what many looked at as offering substandard products to a more local and convenient way to shop.
Leading dollar store retailers have asked vendors to be creative and innovative when pitching new products. Indeed, the expansion of customers to the fast-growing channel in recent years has stimulated the need to differentiate and bring in products – such as school supplies, household cleaners and some stalwart snack food staples – that were non-traditional to the dollar store of a decade ago. However, with new reach we are seeing product expansions that move toward personal health products, over-the-counter drugs, on-trend clothing and even ready-made foods.
Customers are not only enjoying the convenience and price of these products, but are also increasingly relying on their availability in easy-to-shop floor plans. In fact, research has shown that one of the biggest complaints from dollar store customers in the past has been the unpredictable availability of some key products.
Appealing to the Dollar Store Buyer
Clearly, the model is different for dollar store shoppers than it is for traditional retailers. Product lots are shipped to stores in smaller quantities, which often require augmented packaging and pricing from manufacturers that are geared specifically to the channel.
As the Deloitte study further notes, strategies that many companies have adopted so far for dollar store retailers have been met with mixed results, with the most effective to date being, cost reduction “through innovations in operations and supply chain for existing national brands.”
Developing and investing in solutions to meet the logistics, packaging and customer requirements for dollar stores shows huge potential for future growth as these retailers are seeking higher quality consumer products to fit the needs of their expanding customer base.
For a deeper dive into the universe of dollar stores, including locations, market penetration, retail buyer contact information and more, our Marketing Guidebook is a one-stop resource packed with a dynamic online database covering a wide range of retailers, including supermarket chains, drug stores, dollar stores, supercenters, wholesale clubs, specialty retailers and more.