More than 40% of holiday shoppers heading to dollar stores

Dive Brief:

More than 40% of holiday consumers told business consultancy The NPD Group that they plan to shop at a dollar store like Dollar General, Dollar Tree and Dollar Tree-owned Family Dollar this season.
The overall popularity of those retailers has risen 3% year over year in the 12 months ending October this year, according to NPD's Checkout retail receipt tracking service. Average spend per buyer at such stores has also risen 7%, from $165 to $171, according to an NPD press release emailed to Retail Dive.
These retailers are attracting a wide swath of consumers. Nearly a third of dollar store spending comes from households with annual incomes of $100,000 or higher. Among four lower-income brackets, spending is somewhat evenly distributed, with the second highest coming from households with annual incomes of $25,000-$49,999, NPD found. Older Gen Xers 45-54 years old are shopping at dollar stores the most, representing 30% of spending, but younger shoppers are also prevalent, according to the report.

Dive Insight:

Dollar stores' slim margins leave them with little wiggle room, but their broad assortments and low prices, a necessity for many people on tight budgets, are attracting spending from consumers of various age groups and spending power, including at the holidays.

Dollar Tree and Dollar General are both in expansion mode, though they've also had to tighten their belts in response to rising wage and freight costs. In the most recent quarter, store comps at Dollar Tree rose 2.3% on a constant currency basis (2.2% adjusted for Canadian currency fluctuations) and the Family Dollar banner fell 0.4%. Dollar General third quarter comps rose 2.8% from a year ago as traffic remained flat. Dollar General earlier this month also reiterated plans for 900 new store openings, 1,000 store remodels and 100 relocations by January 2020.

"The successes dollar stores are seeing at brick-and-mortar, and watching how it unfolds as the holiday season wraps up, will tell an important story about the state of retail," NPD Group chief industry advisor Marshal Cohen said in a statement. "In a world where online continues to threaten the livelihood of physical stores, dollar stores are proving brick isn't dead as long as it delivers the right balance of value to the consumer."

As they've improved their assortments, the retailers are offering more than savings, Cohen also said. "Dollar stores' old bargain-based reputation is now more about value and variety, expanding their reach among consumers," he said. "Especially during the holiday shopping season, time-starved consumers are attracted to one-stop retailers that help them minimize the surge in their spending."