A parent’s nightmare: Five Below is opening nearby

Five Below is opening a new store on the road I drive on every week. My life may never be the same.

Four years ago, our then 15-year-old asked if we could check out a store his friends had told him about. Long story short, I agreed and we left after buying a couple of things (all at or under $5, per the chain’s name). At the time, I thought that was the end of it. It wasn’t, because we also had our then three-and-half-year-old with us. For her, Five Below had become a magical place. In the ensuing years, she has never seen a Five Below sign without asking if we can go in. She’s been disappointed many times more often than not, but the requests persist.

Speaking with other parents with kids in elementary school, I’ve learned their children also suffer from various degrees of Five Below fever. While it may be an inconvenience for me, it’s a great sign for the chain’s business.

[Image: Five Below]

Five Below, which bills itself as an "extreme-value retailer catering to pre-teens, teens and beyond," recently opened its 400th store and has sights set on reaching 2,000 under CEO Joel Anderson. The chain opened 62 stores last year, and plans to add another 70 this year and 85 in 2016. Just yesterday, the chain announced it is opening its first stores in Florida.

Five Below groups products within eight "in-store worlds": candy, crafts, party, room, sports, style, tech and now.

Mr. Anderson, who was named CEO last December, recently told the Philadelphia Inquirer that technology accessories are among the chain’s strongest sellers. "Kids change out their [phone] cases like apparel, like their socks," he said.

The company recently reported a net sales increase of 22 percent for the latest quarter, while comp store sales improved 1.7 percent for the period.

BrainTrust

"I’m not Five Below’s target market yet I’ll still find myself sucked into the madness. The stores take the treasure hunt aspect of Dollar Tree and add a lot more color, more kitsch and, most importantly, more fun for shoppers of all ages."

Kelly Tackett

Principal, 3E Insights


"Five Below’s positioning and catering to pre-teens and teens is brilliant. I can personally attest to and confirm Mr. Anderson’s insight that "kids change out their phone cases like apparel, like their socks.""

Adrian Weidmann

Managing Director, StoreStream Metrics, LLC


Discussion Questions

What is your assessment of Five Below’s brand positioning in the marketplace? Do you see 2,000 stores as an attainable national goal for the chain?

Poll

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Ian Percy
Ian Percy
8 years ago

I admit to total ignorance about Five Below. But taking this article at face value (which we can confidently do since George wrote it) it seems to me there’s something here that runs opposite to most other retail initiatives.

Most enterprises think up the “brand” and/or position they want in the marketplace and then try to make that brand happen via marketing. That takes a lot of work and if the consumer experience of the store is different than the branding, it all falls apart. Experience always wins over the marketing story.

But the story here seems to be that Five Below’s primary customers are in charge of the brand. Sure there were executive decisions, marketing strategies and the like, but all that was but to prime the pump. Once primed, George’s kids and their BFFs took over and said “we’ll take it from here.”

The ultimate confirmation of your vision or mission statement is when your customers want success as much or more than you do. Only trouble is George now has to find a detour.

Ryan Mathews
Ryan Mathews
8 years ago

Five Below is well positioned and, in theory, 2,000 stores doesn’t seem unreasonable.

That said, for once I’d like to see a retail business set organic growth targets rather than pick an arbitrary number of stores. The latter may be a good way to attract capital but the former is the surest path to sustainability.

Kelly Tackett
Kelly Tackett
8 years ago

I’m not Five Below’s target market yet I’ll still find myself sucked into the madness. The stores take the treasure hunt aspect of Dollar Tree and add a lot more color, more kitsch and, most importantly, more fun for shoppers of all ages.

The eight worlds are spot-on in terms of the core demographic and there’s easily potential for a lot more of these stores. Let’s just watch out for cannibalization!

Adrian Weidmann
Adrian Weidmann
8 years ago

Five Below’s positioning and catering to pre-teens and teens is brilliant. I can personally attest to and confirm Mr. Anderson’s insight that “kids change out their phone cases like apparel, like their socks.” Over the past several years my daughter has collected a drawer full of phone cases. She brags about how little she paid for some. There are others where she avoids commenting on the price — I can only imagine that those would not be purchased at Five Below.

Just like shoppers before them, pre-teens and teens want to be surprised and delighted during their shopping journey. Five Below is the modern bazaar for young adults. I believe 2,000 stores is absolutely in Five Below’s future.

I suspect that they will also resonate with adult shoppers and compete (successfully) for Family Dollar/Dollar Tree clients.

Ed Rosenbaum
Ed Rosenbaum
8 years ago

Five Below is relatively new on my radar screen. I have done some research since I first heard of them. What interests me most is the magnetic draw it has on young children. Like George said, his daughter can’t pass one without wanting to go in. Can you imagine the elation in the Five Below board room when they read these types of comments? It is no wonder their game plan is to keep opening stores as fast as they locate large pockets of kids.

J. Kent Smith
J. Kent Smith
8 years ago

Could be a very compelling proposition — more latitude than a dollar store, a fresh, fun take on inexpensive, a relatively simple and flexible store to build, ample availability of real estate and a relatively low-complexity operating model. Compare this to dollar stores and small format discounters — could grab the middle income demographic far better. Will be interesting to watch.

Anne Howe
Anne Howe
8 years ago

I’ve not heard of Five Below either. Shameful for me to admit. I agree with Ryan, setting an arbitrary number for store count seems rather “yesterday” but I really like the idea of the in-store “worlds” — they make sense and I’m sure they’re very shopper friendly.

I’m thankfully past having pre-teens and teens to contend with but I am anxious to see the format. It sounds like a great concept.

Could today’s dollar stores experiment with the “worlds” merchandising concept? I think so.

Camille P. Schuster, Ph.D.
Camille P. Schuster, Ph.D.
8 years ago

Farther reading the article, I will definitely visit one of the stores when I see one. Keeping merchandise current and attractive to the teen and pre-teen market is a challenge. If the company pays attention to the social media talk among its consumers and has the agility to respond, they will have created a great position for themselves.

Craig Sundstrom
Craig Sundstrom
8 years ago

I agree with the others that companies shouldn’t set “arbitrary” store-count goals, but what’s to say that was the case here? I’m willing to give them the benefit of the doubt and guess they performed a detailed analysis of market potential based on demographics, income growth (or the lack of it) and competition and came up with the 2,000 figure (or maybe 1997.6…but something close).

The problem of course is when the projections don’t work out—who’d have thought?—or six or seven competitors all plan to do the same thing. I wish them well.

Bill Hanifin
Bill Hanifin
8 years ago

I haven’t had the opportunity to visit a Five Below store, but the positioning does seem to be a nice wedge between the “Dollar Stores” concept and traditional retail.

To answer the poll question, I would have to evaluate product lines by the available margins and then match up demand to opportunity. There was not an option for Toys, but it seems that items with a higher price point that are made available for $5 or less would be very attractive. For that reason, I don’t think that candy, for instance, would be the right area to emphasize.

Maybe we should start a GoFundMe page for George Anderson to help him feed the Five Below habit!