Nielsen: Dollar Stores Not Just for Low-Income Shoppers Anymore
By Al McClain
Obviously, the economy
had to play a big part at the Nielsen Consumer 360 Conference this year.
And, it did, with one workshop entitled "Rise of the Dollar Channel," presented
by Jeff Gregori, VP of retail services for Nielsen, showing that
a lot has changed recently with the channel. As consumers respond to the
economic downturn by simplifying their lives, the dollar channel is providing
convenience, value, and a new level of shopping consistency.
According to Nielsen,
the channel has grown with consumers of all income levels, but is up the
most with higher-income shoppers (+10 percent vs. YA), and that growth
accelerated in the last half of 2008.
The primary dollar store
shopper, however, has a lower-income with the group representing 45 percent
of dollar store sales even though it represents only 29 percent of U.S.
Dollar stores have been
gaining sales a number of ways, but one big one is that shoppers are switching
from other channels. In fact, the dollar channel is a net gainer of switchers
from all channels except
"value grocery" such as Aldi and Save-A-Lot.
While the channel’s store
count is stable (growing only about two percent annually), trip growth
continues. Lower-income shoppers, for example, made an average of 17.2
channel trips in 2008, up from 16.4 in 2007.
The channel’s heavy shoppers
are categorized as
"plain rural living" – those in small town and rural areas
with the second poorest lifestyles, relatively high home ownership, a high
incidence of non-Hispanic whites and an index of 188.
A secondary target is "struggling
who have a low incomes, low net worth, and index at 116.
Top categories for the
channel – based on dollar sales – include paper, candy, pet
food, snacks, detergents, carbonated beverages, wrapping and bags, household
cleaners, cookies, and laundry supplies. Many of these categories have
low conversion rates, so there is plenty of upside remaining.
Light shoppers for the
channel include "senior couples", "senior singles" and "younger
bustling families." Light shoppers tend to stick with the basics and
their conversion rates tend to be low – i.e., candy at 41 percent,
paper at 32 percent, and carbonated beverages at 14 percent.
Emerging non-edible categories
for the channel among mid-income shoppers include diapers (with only two
percent penetration), baby needs (nine percent), and cough/cold (12 percent).
Food categories that are emerging with high-income shoppers include bottled
water, pet food, and carbonated beverages.
Food now represents 31
percent of channel business vs. 26 percent in 2005. Dollar General is now
at 34 percent. Consumers at all income levels appear to enjoy the price
and convenience of food and beverages in dollar stores. Showing how the
channel has changed, Nielsen says that only 23 percent of the channel’s
dollars are in items that sell for less than a dollar.
HBC is a challenge for
dollar stores. Most channels convert at about 80 percent while HBC converts
at a 65 percent rate, possibly due to a lack of trust. Specific
areas of challenge include oral hygiene, which converts at only 32 percent,
vitamins at eight percent, hair care at 27 percent, and cough/cold at 18
Private label is still
relatively undeveloped in dollar stores and, in fact, the channel is increasing
its branded focus. Nielsen says brands of all scale are leveraging the
channel for growth. While low-income shoppers have a preference for brands,
assortment has to be tailored to the channel. And, assortment is
changing quickly, as food and beverage products are driving a lot of the
Is the growth of the dollar store channel mainly due to economic conditions
or to the channel doing a better job of meeting consumers’ needs? Will
the channel continue to grow when the recession ends?
and Middle Income Shoppers Spending More in Dollar Stores – The
- Nielsen: Dollar Stores
Attract Upscale Crowd – Brandweek