Millennials with money go shopping in dollar stores

Discussion
Photo: Dollar General
Jun 17, 2016
George Anderson

Going back even before the Great Recession, there were periodic reports about the changing face of consumers shopping in dollar stores. Anecdotal accounts of shoppers driving their Mercedes to dollar stores to save a few bucks have made for good copy over the years. There have also been studies showing how “affluents” shop dollar stores, including new research showing how upwardly mobile Millennials are affecting the performance of the top chains in the channel.

NPD’s Checkout Tracking, according to a report by Reuters, has found that 29 percent of Millennials who shopped at Dollar General, Dollar Tree and Family Dollar were from households earning over $100,000 a year. By tracking sales receipts, NPD has estimated that shoppers in this group represent about 25 percent of total sales made by the three chains.

Dollar stores have certainly made the most of the retail times, both good and bad, of late. While the Commerce Department has reported a rebound in retail sales the past couple of months, that improvement has not been universal. Dollar General reported a 2.2 percent gain in same-store sales in the most recent quarter as both its traffic count and average transaction size improved. Earlier this year, the chain announced plans to add roughly 1,900 new stores over the next two years to bring its total count to more than 14,000.

Dollar Tree, which completed its acquisition of Family Dollar last July, also saw its same-store numbers improve 2.2 percent.

DISCUSSION QUESTIONS: Do you think the shopping base of dollar stores will skew more affluent in the years to come? How, if at all, will this affect how dollar stores operate their businesses?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I think the dollar store in many ways is just the convenience store of the present."
"I’m not convinced that such a skew will occur beyond the current dollar store shopper profile."
"Based on Prosper Insights & Analytics databases, 2.5% of dollar channel shoppers have household income of $100,000+."

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22 Comments on "Millennials with money go shopping in dollar stores"


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Chris Petersen, PhD.
BrainTrust

The logic might focus on “price” and how dollar stores are siphoning away customers from Walmart on the low price side. Dollar stores have certainly made in-roads with “value” products, as well as improved assortments.

But there may be another factor here. The dollar stores are typically a small-format store that can be placed in local neighborhoods. They are much closer to the customers than the big box stores in the burbs. In many cases dollar stores have become the new convenience stores located at convenient drive-by locations for commuters of all income levels. If the dollar stores can create a logical stop for key items and then improve the basket with better range of assortments, the potential for consumer growth is not limited by income or demographic.

Gene Detroyer
BrainTrust

The big issue is not affluent Millennials shopping in dollar stores. It is the rejection of traditional brands and accoutrements that previous generations were attracted to. Millennials would rather spend their money differently. They are putting off traditional purchases (homes/cars) or avoiding them entirely.

I have written previously that I know a real estate developer that focuses on building apartments in the NYC suburbs. These buildings are withing walking distance of the train stations. The apartments are simple. The renters don’t generally own cars. But a gym in the building is essential as is a Starbucks or the like.

Oh, this target is not lower-income by any means, they just spend as little as possible on essentials and use it for experience, as small as a coffee or as big as traveling the world.

William Hogben
BrainTrust

I think you’re on to something with it being a cultural shift, Gene. I am, coincidentally, a Millennial who has been shopping at dollar stores more often lately. The savings is not the key factor — rather it’s the atmosphere: More utilitarian, efficient and honest. I think my generation has grown up with a stronger awareness of climate change and resource depletion, and we see controlling our consumption more in ethical and global terms than just budgetary.

David Livingston
Guest
2 years 4 months ago

Retailers are finding it just doesn’t pay to open in blighted areas where households are under $100,000 per year. Nearly all the new shopping centers will contain a dollar store and new shopping centers are generally not constructed in difficult areas. I don’t think it will affect how dollar stores do business. I was in Walmart recently and looked at their comparable “dollar” store merchandise and it was priced at 75 cents. Walmart has been closing stores by the bushel in lower-income difficult areas and focusing more in areas that are financially stable. For all practical purposes, Walmart is the largest dollar store of them all.

Steve Montgomery
BrainTrust

Dollar stores have evolved from being treasure hunt-based to carrying more staples. This process has included adding more refrigerated and frozen displays, adding more grocery brands and cigarettes and other destination drivers and creating a more attractive shopping environment.

This transition has repositioned the industry in the minds of the consumer. It is now seen as an alternative to convenience stores and, as has been discussed in this column, to Walmart. It has broadened their customer based to include more affluent shoppers seeking a deal. I don’t see this changing.

Bob Phibbs
BrainTrust

I think the dollar store in many ways is just the convenience store of the present. Yes Millennials are frugal — some would say cheap — but I doubt they are driving out of their way (using gas) to choose the dollar store.

Tom Redd
Guest

Hey, ignore all the heavy thinking — if you can get it cheaper then do it. Our Scottsdale, AZ Walmart has loads of Mercedes, Porsches and cars like Cadillac CTSes/STSes in the parking lot. Dollar stores like Big Lots will slowly tune the assortment as Family Dollar did and sell the brands people like cheaper. Walmart, in our area, has already made sure that they beat the prices and have more people on the floor to help newcomers find things. Saving money on operational items leaves more money for dinners out — which is what most people do in AZ. It seems everyone goes out to eat all the time. Give me a Costco Pizza and an ice water and I am fine!

Ed Rosenbaum
BrainTrust

It appears even the affluent are going to save a few dollars if they can. And the dollar stores are certainly a place to shop. Others have commented that dollar stores are what the convenience stores were. It makes good sense. I commented a few days ago that there are many draws to the dollar stores. For example, my wife and her friends buy the birthday, anniversary, etc., cards there each month. While there, they are looking for other bargains and often find them. My guess is those dollar stores we looked at with some questioning are becoming a destination for many shoppers looking for a bargain. It will only get stronger in time.

Ralph Jacobson
BrainTrust

I have always thought that dollar stores are attractive to all demographics. Who doesn’t want a great deal?! Just because a person has disposable income doesn’t mean they want to waste it. These new findings confirm that younger generations feel this way. I see Millennials, now the largest age demographic recently surpassing Baby Boomers, only increasing their demand for these categories of retail.

Kim Garretson
BrainTrust
2 years 4 months ago

This perception is completely anecdotal, based on me living in Minnesota and having a lake cabin in Missouri. Obviously lake cabin owners are affluent, and spend a lot of money in-season for their cabins, which in many cases are McMansions. Often the nearest stores for buying commodities for their second homes are dollar stores. I wonder if you could sort out affluent shoppers buying for second homes, and if this would affect the numbers at all?

Lee Kent
BrainTrust

In my area, the dollar stores seem to be positioned close to grocery stores such as Kroger and Publix, making it quite easy to run into the dollar store before or after your weekly grocery run. It has nothing to do with affluence, IMHO.

Maybe the affluent shopper doesn’t buy their shampoo from the dollar store but they will buy birthday cards, balloons for parties and gift wrapping. And once you get inside, it’s hard to not notice other items that you could have bought for a dollar.

There once was a time that people were snobs about where they shop but with brands like Costco, all that has changed.

And that’s my 2 cents.

David Slavick
Guest

Long-standing studies reveal that affluent or upper middle class consumers have a much higher propensity to seek strong price/value in the stores they shop and items they buy. With smaller-sized households the dollar stores will attract this segment but not a skew of any significance such that the stores would merchandise differently. It’s all about location, and dollar store chains located in strip centers are hardly convenient to upper income or value-seeking Millennials.

Ken Morris
BrainTrust

I believe that the base will continue to shift to a more affluent clientele and, even if the numbers don’t shift, the sales percent will, if the dollar stores can add enticing Millennial impulse items to their product mix. The Millennial mindset seems to incorporate a mix-and-match mentality that incorporates fast fashion with investments in premium-brand clothing, Ikea items with Roche Bobois. I see this phenomena as simply an extension of that mentality where they may shop at Whole Foods, Target, Trader Joe’s and the dollar store … this trend will continue.

Ben Ball
BrainTrust

It might be prudent to reassess our paradigm of “households over $100,000” since this seems to drive part of the “huh?” in this finding. Millennial households making over $100,000 most likely have advanced degrees — and the debt to go with it. They are also trying to break through the lifestyle floor of “middle-class America.” Even if they aren’t buying homes and cars (yet) they are paying high rents. So why shouldn’t they be inclined to save a buck on sundries and consumables when they can? Especially if it is also the most proximate/convenient option. When you get down to it, they really aren’t much different than the housewife in the BMW pumping self-serve gas that we used as a stereotype of the “frugal shopper” back in the recession years of the mid ’70s or early ’80s. It’s just that they want to travel and dine out instead of buying a house in the ‘burbs and driving a Beemer.

Joan Treistman
BrainTrust

When I get the opportunity to shop in a dollar store, I’m right there. It’s a fun experience for me. It doesn’t take that much time to go through the aisles looking for something to jump out and say “buy me.” Because the stores are usually smaller than grocery stores there are fewer items on display, offering a chance I’ll notice something that I wasn’t looking for but really “needed,” like office supplies, wrapping paper, aluminum foil or my favorite soup for $1 a can instead of $3.49.

Fun and savings are what drive me to dollar stores. If there were some close by (walking distance for me) I’d be there more often. And I agree that it would have that “convenience store” cachet.

As dollar stores leverage their advantage among more affluent consumers I expect they’ll spread out a bit more. I just hope that they don’t change the aura or customer experience.

Shep Hyken
BrainTrust

Millennials grew up with dollar stores. From personal experience, my Millennial-aged kids (all in their 20s) enjoy the merchandise and the price from dollar stores. So I just talked to my daughter and asked her about this, and her response was, “Who doesn’t like a good deal?”

It doesn’t matter if it’s affluent customers, Millennials or any other demographic, any/every company has to understand who their customer base is and track how their customer base is changing. Understanding the trends will help with what changes have to be made to stay relevant in the marketplace.

Richard J. George, Ph.D.
BrainTrust

I’m not convinced that such a skew will occur beyond the current dollar store shopper profile. Other competitors have either entered or upped their game to provide value regardless of income. Plus, the impending arrival of Lidl with its share of national brands at value pricing will provide another such option.

Regarding the Millennial research reported here, this corroborates my research on Millennials. In my research, 38 percent of Millennials indicated that they shopped for groceries in a dollar store during the past 30 days. Other significant results: regular/full-service supermarket = 56 percent; online/internet/mobile = 24 percent. This is a generation that is delaying parenthood, abandoning marriage and not buying cars — instead preferring to share versus owning most things in addition to an automobile.

This generation, regardless of the various economic strata, represents a real opportunity for dollar stores.

Roger Saunders
BrainTrust

Based on Prosper Insights & Analytics databases, 2.5% of dollar channel shoppers have household income of $100,000+. If these households represent 25% of sales in Dollar General, Dollar Tree, and Family Dollar, as NPD data indicates, CPG firms and Wall Street, and perhaps the dollar chains themselves, are missing a bigger opportunity.

While 14.9% of dollar store shoppers are part of the younger portion of Millennials, 18-24, the fact remains that 65.1% of dollar store shoppers have household income of less than $35,000.

There will always be treasure hunters and value seekers, but the lease hold rents that dollar chains often have, will make it challenging for them to attract higher household income shoppers in significantly larger scale.

Craig Sundstrom
Guest

It’s certainly plausible (that it is skewing affluent), but it’s hard with the numbers given to separate “more affluent people shopping there” from simply an expanding store base reaching more people.

Anyway, line extension is the natural order of a business reaching saturation — Kresge the 5&10 eventually morphed into K-mart the discounter — so upgrading of store offerings is possible.

HY Louis
Guest
2 years 4 months ago

Affluent people or low income people, they both know a good deal when they see it. The most popular restaurant here on Maui is Costco’s snack bar where you can get a 1/4 lb hot dog and a drink for $1.50. The line is 50 deep all day long. Many are affluent people from around the world who have second homes here. We also have a lot of homeless. No other business can come close to providing this kind of value.

Kenneth Leung
BrainTrust

It is a matter of the new shoppers being much more savvy and also less bound to brand image like before. Affluent shoppers today love to mix and match hi-lo items. Chanel bag with a dollar hair clip for example, an expensive wine gift wrapped in a dollar gift bag. Fact is, the dollar store is now baked into the shopping culture at all income levels. As long as the shopper feels safe at the store, and the merchandise is available at the expected price point, shoppers will be there.

Matt Talbot
Guest

I believe that the shopping base of dollar stores will skew more affluent in the years to come. However, as is with any Millennial fad, this too will come and go. That said I do think that the years of neglecting a dollar store because of the associated stigma are behind us.

Millennials have a tendency to bring attention to select trends from the past and make them “cool” again. Now that the dollar store has been accepted by the millennial generation it will remain relevant for years to come.

Still, I don’t think this will affect how dollar stores operate their business. I agree with the other BrainTrust members that the dollar store is the equivalent to a modern convenient store, but I don’t think recent millennial or affluent attention will change the way these stores conduct business.

wpDiscuz
Braintrust
"I think the dollar store in many ways is just the convenience store of the present."
"I’m not convinced that such a skew will occur beyond the current dollar store shopper profile."
"Based on Prosper Insights & Analytics databases, 2.5% of dollar channel shoppers have household income of $100,000+."

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