Dollar Tree CMO Messerschmitt Reveals Its Four Shopper Types — and Two Driving Its Future
People have long shopped Dollar Tree, with a loyal core returning regularly for low-price essentials, but this 9,238-store chain with $19.5 billion in sales also wants occasional and new shoppers to make an extra trip: One that collectively could net an additional $1 billion in sales.
"That's the marketing challenge," Brian Messerschmitt, chief marketing officer, Dollar Tree, told audiences Nov. 13, during the Path to Purchase Institute's LIVE event. "There is no bigger opportunity in our company, and I think about this every day: How do I get these folks to come in one more time?"
Knowing its shopper base is crucial. "We have a broad reach [with] 100 million households shopping with us," he said. "That puts us as the fourth highest penetrated retailer, only behind Walmart, Amazon and Target, … and we're right behind Target, so that competitor in me wants to take that third spot.
"That means 75% of the United States at some point this past year has shopped Dollar Tree, which is pretty incredible. And the good news is, we're not done."
Last year, 2 million new customers came to the brand, he said. It's not just the budget shopper, either. "We are seeing a tremendous shift with middle- and high-income folks."
Also Read: Dollar Tree Sells Family Dollar Business for $1 Billion
Dollar Tree for nearly 40 years had sold SKUs at one price point. Then, "in 2021 we broke the dollar," Messerschmitt said. "Most of the assortment went to $1.25, and then in 2023 we started what we call multi-price, that still makes sense to our customers" — adding $3 and $5 items and reaching into $15 and $20 price points.
It's a pretty significant change, Messerschmitt admitted, but Dollar Tree is prepared.
Understanding its shoppers is essential. According to Numerator data, Dollar Tree has four types of shoppers:
- Passionates: 6 million households who account for 28% of DT's sales. They average 75 trips a year. Typical basket size is $13.03. They're low income. Home essentials drive their shopping trips.
- Monthly: 24 million households who make up 43% of sales. They average 25 trips a year. Average basket size is $13.88. Their income is low to medium. They love the thrill of the hunt.
- Occasional: 62 million households accounting for 26% of sales. They average six trips a year, with a $14.12 basket size. Incomes range from medium to high. Occasions and parties drive their shopping.
- New: 8 million households, making up 2% of sales. They typically make three trips a year and spend $15.10 on average. They tend to be high income and also shop for parties and occasions.
The new and occasional shoppers are of particular interest to Dollar Tree: Those 70 million shoppers, if they made one more trip, "would add up to $1 billion in incremental sales every year."
The retailer is taking a three-pronged approach to nurture growth — through value, convenience and discovery.
- Value: Dollar Tree stores average about 10,000 SKUs, with many at $1.25 price points. (A few items, in recent months, are now $1.50.) Fairly recently (year) Dollar Tree has added $3, $5 and even a few $20 items. "No matter the price point," Messerschmitt said, "it is a tremendous value in retail," one its merchandising team takes seriously.
- Convenience: Dollar Trees are fairly common throughout North America, with 9,238 locations. "You can almost throw a rock and hit a Dollar Tree anywhere near a suburb or an urban area," Messerschmitt said.
- Discovery: "Where we tend to win is with that thrill of the hunt. That's why people come to us. … to get great value and things they need." Along the way, he said, they discover surprises they come to love, calling it "a unique position for the brand. There are other players in the channel, but this is kind of our sweet spot." Other stores might have one or two of these facets, "but we are uniquely positioned at the intersection of all three."
Dollar Tree is nurturing that growth and scaling it through several initiatives, including:
- A new brand narrative: The retailer has a fully dedicated in-house creative and photography team. "I'm challenging them to improve our visual identity. Just because we are a dollar store, it doesn't have to look like a dollar store."
- Customer 360 precision marketing: "A great new performance marketing tool we use to drive incremental traffic and sales." Dollar Tree partnered with Epsilon, taking shopper and demographic data to develop a massive database and build audience segments. "We can now reach up to 190 million customers."
- Social media: Leveraging social influencers to tell brand stories, build awareness and engagement to reach various audiences, including bargain seekers, party planners and beauty aficionados.
- E-commerce: Dollar Tree has its own e-commerce capabilities, but it's more for bulk orders. Thanks to partnerships with Instacart and Uber Eats for same-day fulfillment — and because customers tend to remain loyal to their preferred purchasing platform — this "brings a huge new audience to Dollar Tree."
