Why is Five Below a step above?

Discussion
Photo: Five Below
Apr 16, 2019
Tom Ryan

Last week was a good one for Five Below.  The youth-oriented discounter reported a strong holiday quarter, announced that it has accelerated its openings for the current year and reiterated its goal to triple its U.S. stores base. An eclectic mix of merchandise priced at $5.00 or below plays well with its core teen and tween customer base, but management believes it is the in-store experience that drives its outsized performance.

“We’re in the value space and wake up every day trying to deliver more value,” Five Below CEO Joel Anderson told Investor Business Daily in a profile last fall. “We also have to have a great store experience — with music playing and associates who have energy and bounce. At the heart of our competitive edge is some retailers are doing one or the other — not both. We try to deliver value in a great store experience.”

Compared to other dollar stores, Five Below features pumping music, bright colors and playful slogans, such as “$1 Stuff: as close to free as it can be!”

The majority of the mix is non-essentials across tech, toys, beauty, sports, style, home and candy categories aimed at the teen and tween set. The “Wow” comes from the unexpected finds, whether hedgehog headphones, D.I.Y. crystal bath fizzies kits or heart-shaped cat-eye sunglasses. The mix also includes greeting cards, picture frames and yoga mats for older consumers without such basics as laundry detergent and paper towels found at a typical dollar store.

“When you walk into one of our stores, you will discover things you didn’t know you wanted. It’s like a treasure hunt. We’re the T.J. Maxx for kids,” Mr. Anderson told The Wall Street Journal.

Key to recent success has been getting in early on trends such as fidget spinners and make-your-own slime. Encouraging visitors to play with the basketballs, test-drive radio-controlled cars and participate in slime-making contests also leads to Instagramable moments.

“If you spend time in a dollar store or mass merchant like Target or Walmart, it’s not really about letting go because you’re there to meet your needs,” EVP of marketing and strategy David Mauken told The Washington Post. “Our purpose is really simple: we want customers to be able to let go and have fun.”

DISCUSSION QUESTIONS: How would you describe Five Below’s formula and why is it clicking with consumers? Do you see any competitive threats or other obstacles that might impede its goal to triple its stores?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Five Below customers actually have FUN while shopping in the stores. It's retail theater."
"There’s that old phrase “when you’re hot, your hot and when you’re not, you’re not” that applies here. Five Below is doing everything right."
"Where else can I find 10 for $1 candies or my childhood favorite – Skybar?"

Join the Discussion!

15 Comments on "Why is Five Below a step above?"


Sort by:   newest | oldest | most voted
Mark Ryski
BrainTrust

It’s not easy to find a new niche in retailing, but that’s exactly what Five Below has done – and they have the retail chops to execute the concept brilliantly. The treasure hunt concept has proven to be durable and compelling, and so perhaps it’s not surprising that having one for younger consumers would be successful also. The fact is, none of the products at Five Below offers are special or unique – the real magic is the store experience they deliver. Of course others may try to knock-off the Five Below concept, but it will be hard to catch them. I think the most likely competitive threat will come from the incumbent dollar store players who decide to increase their product mix to the same demographic as Five Below.

Art Suriano
BrainTrust

There’s that old phrase “when you’re hot, your hot and when you’re not, you’re not” that applies here. Five Below is doing everything right. The company has captured the audience and has found its niche, and they are maintaining the buzz and excitement about their business. There is no telling how long it will last, but for the moment there are no signs of the attraction fading off. Five Below is continuing to open stores at a competitive rate and, hopefully, they’ll be careful not to open too many because that could begin to hurt them. However, for now, Five Below is enjoying all the benefits of a business, that has outsmarted its competitors with a winning formula bringing them tremendous success that doesn’t show any signs of ending soon.

Dave Bruno
BrainTrust

Five Below is an excellent example of how much experiences matter. As Five Below demonstrates, even shoppers in the dollar category care about experiences. The unique mix of value and in-store fun combines with an assortment strategy that is highly relevant to their target shopper drives their success. There’s a lesson here for retailers in every category.

Neil Saunders
BrainTrust

There are a few things that help Five Below achieve solid growth.

First, it has a wide appeal among age groups. Much more so than traditional dollar stores, which tend to attract older and family shoppers. Five Below gets those too, but it also secures younger consumers thanks to its assortment and store ambience.

Second, stores create a treasure hunt mentality and there are lots of ever-changing bargains on offer. This pulls in footfall and drives impulse purchasing.

Third, the value for money position creates guilt free, affordable shopping which really helps conversion rates.

Finally, Five Below has some good locations – near supermarkets and in strip malls with high footfall.

Rich Kizer
BrainTrust

I have seen the consumer transition strategy actually happen in Five Below. For years on visits to a relative, I treated my nephew to a trip to his favorite store – Five Below. It never failed. During my last visit, my nephew asked if his sister could go along; she had never been to Five Below before. That day I saw consumer advocacy at it best, introducing my niece to this experience. She was “Alice in Wonderland.” Not only did they retain my nephew, they got a new customer to boot. Beyond the selection of product and all the ambience introduced it is, as the article stated, fun and affordable.

Evan Snively
BrainTrust

Rich, I have had a similar experience shopping for/with young ones in my family. Quick adaption to trends (I realize how out of the loop I am from what’s “cool” every time I visit with my 8-13 year old cousins), rotating merch, and just the overall depth of options make every experience unique. You never feel like you are walking into the same store twice with Five Below visits!

Ken Morris
BrainTrust

Off-price retail has been one of the hottest segments in retail for several years. From dollar stores to off-price clothing like T.J.Maxx and Ross Stores, this category is very profitable. The treasure hunt mentality has become a fascination for many shoppers and Five Below has carved out a unique niche. In the $5 price range, there isn’t any real competition and Five Below has been hyper-focused on making the experience amazing for their target audience – teens and tweens. They make shopping fun and rotating merchandise regularly makes frequent visits worthwhile. I recently took my grandson shopping there and it was a whole new experience for him. He is seven years old, has his own money, makes his own choices and even rings himself out.

Five Below understands the “theater” of shopping, they know their customer and they are knocking it out of the park.

Michael Decker
BrainTrust

Five Below did two things early on that are paying off in spades now. They differentiated from their competitors and they differentiated from e-commerce. No holds barred, Five Below is NOT the staid (depressing?) smart value store that Dollar Tree and Dollar General are today. People bring both sides of their brain to Five Below and are immediately rewarded both emotionally and rationally. Five Below customers actually have FUN while shopping in the stores. It’s retail theater. And Mr. Anderson has it exactly right — if you’re asking people to drive to your stores, you better deliver an experience that they won’t get from their living room chair. All of physical retail should take note. Evolve and thrive or perish!

Dr. Stephen Needel
BrainTrust

I’m aging myself (yet again) by saying it reminds of a modern Woolworth’s – all kinds of stuff you might or might not need at a great price. And Tom – you missed the best part of the store’s content – the candy. Where else can I find 10 for $1 candies or my childhood favorite – Skybar?

Georganne Bender
BrainTrust

Five Below’s CEO is absolutely correct in saying some retailers do one or the other right to create a memorable in-store experience. Not doing it all well leads to customer disappointment.

Shopping at Five Below is a fun hunt for cool things you didn’t know you needed. Grab a basket! Those under 5 buck purchases add up.

Lauren Goldberg
BrainTrust

Five Below was smart in selecting an underserved customer target (teens and tweens) and created a shopping experience for them. From the price points to the merchandises assortment, they have been focused on their customer and it shows. In addition, they have been smart with their real estate — very often in shopping centers with other off-price brands.

Andrew Blatherwick
BrainTrust

It is so refreshing to hear that a discounter is not just relying on price to drive their business but realizing that store experience is also vitally important if they are going to attract customers. Loud music may not be everyone’s idea of a pleasant shopping experience but again Five Below know their target customer and what they do want. So often discount stores are drab places with very little in the way of experience, which is wide open for larger retailers to match them with lower prices. Bottom line – if there is nothing extra to offer then price is a very singular reason to shop.

Mohamed Amer
BrainTrust

When you can bring deep value (bulk purchases and dollar store model) and fun shopping (treasure hunt in non-staple categories) together to an underserved segment, you greatly increase your likelihood of success. Five Below has executed well as they’ve captured the imagination of their young target segment.

Expecting to maintain current merchandising strategy intact, the company has to manage comp store growth with new store openings at the same time as managing capital market expectations for EPS growth and future share price increases.

Chris Angell
Guest

Dollar stores are typically an isolated, lonely shopping experience. For many retailers, there’s one associate in stores and they’re doing everything, from checkout to stocking shelves. As a result, Five Below’s approach is uniquely different in this segment and it’s noticeable. Their unique assortment and approach have created a solid niche among other dollar stores.

Stefan Midford
Guest
2 months 21 days ago

Five Below is an excellent example of how much experiences matter. As Five Below demonstrates, even shoppers in the dollar category care about experiences. The unique mix of value and in-store fun combined with an assortment strategy that is highly relevant to their target shopper drives their success. There’s a lesson here for retailers in every category.

wpDiscuz
Braintrust
"Five Below customers actually have FUN while shopping in the stores. It's retail theater."
"There’s that old phrase “when you’re hot, your hot and when you’re not, you’re not” that applies here. Five Below is doing everything right."
"Where else can I find 10 for $1 candies or my childhood favorite – Skybar?"

Take Our Instant Poll

How likely is Five Below to reach its growth goals?

View Results

Loading ... Loading ...