Information Resources Report on Dollar Stores

The $12.5 billion dollar store channel has clearly arrived and shows no sign of slowing. Dollar store operators are aggressively working to broaden offerings, increase convenience relevancy, and match the deep-value premise consumers seek as economic uncertainty continues to loom. While dollar stores have often been characterized as the source for lower quality non-essentials, consumers prove otherwise, increasing purchases of name brand food and health items in dollar stores. With one in five US households now spending roughly the same amount on consumables in dollar stores as they do in club or drug stores, the competitive retail pool is deepening. "Dollar stores have remained under the radar screen for many retailers -- this study brings the channel's impact and the tremendous consumer momentum to the forefront," said Allen Hill, executive vice president of Retail Marketing for IRI. "Combining information gathered from a variety of IRI sources including our InfoScan(R) Retail Tracking Service and our household consumer panel, the study takes a deep dive and evaluates multiple aspects of the dollar channel and consumer motivation, uncovering opportunities and threats for both retailers and manufacturers." Key findings include:More shoppers and more frequent trips to the dollar store are driving the channel's double-digit growth. Dollar stores added three million new household shoppers in the past year. Shoppers of other channels like food, drug, mass, supercenter, and convenience were not immune to catching the dollar store bug as more than half of the heaviest shoppers in these channels also shopped the dollar store.Dollar stores continue to effectively hone in on an important retail void, combining convenience and low-priced shopping options. Dollar shoppers have strong shopping opinions and differ from some conventional wisdom. Dispelling the myth of the trapped urban shopper, over one-third of the most involved dollar store shoppers like to store hop -- half wish stores were open longer so they could shop at anytime.While on tight budgets, they also think shopping is fun and regularly seek convenient alternatives for traditional grocery and drug purchases. Dollar store shoppers are very deal aware, easily switching brands for savings.li>Heavy dollar store shoppers are an extremely involved shopping group and are driving over 80 percent of consumables sales in the channel. Far from being an obscure minority of shoppers, roughly one in five US households qualifies as a heavy shopper of dollar stores.Dollar stores are seeing additional purchases of many traditional food items as manufacturers continue to develop products and packaging specifically for the dollar channel. Shoppers are also adding more healthcare items to their baskets. Over the past year, shoppers of such items as cold care and analgesics have doubled their individual purchases of those items in dollar stores. Eleven of the top 25 growth categories in dollar stores are health or beauty care (see chart).Top 15 Growth Categories Based on Spending Per ShopperCategory--Dollars Per Buyer--%Change vs.Year Ago Cold/Allergy/Sinus Tabs--$7.97--157% External Analgesic Rubs--$2.63--107% Internal Analgesics--$6.43--100% Cold/Allergy/Sinus Liquid--$4.68--76% Rug/Fabric Treatment--$4.16--64% Denture Products--$5.32--62% First Aid Treatments--$1.94--56% Canned Meat--$4.54 --55% Salad Dressings--$2.84--54% Gastrointestinal--Liquid--$4.90--53% Frozen Meat--$7.24--48% Cough Syrup--$2.97--47% Mouthwash--$4.94--40% Skin Care--$8.05--39% Vitamins--$12.23 --38%SOURCE: IRI Household Panel, 52 weeks ending June 30, 2002, ranked on % chg in dollars per buyer in dollar stores. Total US dollar stores.

Information Resources Report on Dollar Stores

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