Core demographics expand beyond traditional blue collar shopper
Taken
From Discount Store News Fall ‘04
The stigma that shopping at a dollar store once carried seems to be disappearing, as consumers turn increasingly value conscious in a retailing world dominated by Wal-Mart and its promise of offering the lowest prices on name brands.
As a result, dollar-store shoppers today fall within a broad demographic spectrum that continues to widen from an initial core group of rural and low-income shoppers. Some of the fastest growing segments of dollar-store shoppers are in fact moderate- to upper-income households as chains expand into urban areas.
"It's attracting all sorts of people from all walks of life," Sandy Skrovan, vp of Retail Forward, said of dollar stores and related extreme-value formats. "They're very convenient, and the price factor is compelling so that it appeals to everybody."
Rapid expansion in recent years if the large chains—particularly Dollar General and Family Dollar to more urban and middle Income neighborhoods has made these stores visible to shoppers that in the past may not have bought of stopping in.
Surveys by AC Nielsen substantiate this shift, with household penetration or visits to dollar stores by moderate- and upper-income segments growing. In its surveys, AC Nielsen defined dollar stores as including Family Dollar, Dollar General and Fred's, plus single-pricers Dollar Tree and 99 Cents Only
One survey by AC Nielsen showed 68% of consumers shopped at a dollar store in 2003, up from 59% in 2001. Penetration remains highest among low-in-some groups, with 77% of households living on incomes of $20,000 or less shopping the channel. Household penetration is still high at more than 60% for middle-income households, while the lowest is 49% for those making $70,000 or more.
With improvements in product quality, merchandising and store design among the large chains, moderate and upper-income shoppers have been attracted to the treasure-hunt atmosphere of these stores. For those on low incomes, the appeal is quite different.
Despite these different perspectives related to income level, most dollar-store shoppers share a key trait—gender. About 77% of regular dollar-store shoppers are female, a ratio higher than any other retail channel AC Nielsen measures. Next closest is mass, a channel in which 74% of heavy shoppers are women. "This is a retail channel that is just ripe for females who like to browse and shop," said Todd Hale, vp of consumer insights at AC Nielsen. "It's the garage sale or flea market wrapped up in one store."
Another target customer group that represents a significant growth opportunity is older consumers. One-third of dollar-store shoppers are age 55 or older, according to Retail Forward surveys, with that percentage expected to grow as Baby Boomers move into retirement. These stores hold more appeal for older consumers because of their smaller footprints and convenience, according to Skrovan.
With the bulk of stores operated by Family Dollar, Dollar General and Fred's still in small towns, dollar-store shoppers are heavily weighted toward rural, low-income and less educated segments. About 47% of monthly dollar-store shoppers live in small markets, according to a Retail Forward ShopperScape surrvey of 4,000 households. That compares with 25% for medium sized cities and 289^ in large urban markets. Nearly half of heavy dollar-store shoppers live on annual household incomes of under $30,000. (In this survey, Retail Forward considered dollar stores as including Family Dollar, Dollar General and Fred's.
Some slight variances can be seen in the profiles of those who monthly shop one-price stores, such as Dollar Tree. The Shopper Scape survey revealed a heavier concentration in larger cities and stronger affinity among upper-in-come groups. These differences are largely due to a stronger emphasis on treasure-hunt items and heavier store concentration in major cities for 99 Cents Only and Dollar Tree.
The loyal doseout chain shopper, in contrast, skews slightly older and more affluent. In its survey. Retail Forward included Big Lots and Tuesday Morning in this group. Tuesday Morning's target customer is more affluent and older, accounting for this variance, while Big Lots focuses primarily on low-income segments with basic closeout items.
Data on ethnic makeup of the dollar-store shopper may not accurately portray what is taking place in stores. Retail Forward's survey showed 12% of monthly dollar-store shoppers are African American, identical to this group's ratio in the U.S. population, but Hispanic affinity was lower than expected at 2% in the poll.
"Our survey is in English, so it may not be tapping into the Hispanic population," Skrovan said.
One interesting characteristic of dollar-store channel growth is that this niche appears relatively unaffected by Wal-Mart expansion. AC Nielsen surveys reveal that as customers shop at supercenters more, annual trips to supermarkets and drugstores decline, but trips to dollar stores actually remain stable or grow,
"The dollar-store channel is kind of immune to Wal-Mart, because Wal-Mart doesn't compete on the same kind of trip that a dollar store offers," explained Hale.
The ability of dollar stores to broaden their appeal to a wide variety of customer groups should grow stronger in the coming years. Ten years from now, Skrovan expects the dollar-store shopper will closely mirror the general population, despite a strong commitment to low-income customers. •
Dollar Store Services
4505 West Hacienda Ave., Suite I
Las Vegas, NV 89118
1-800-829-2915
FAX: 1-702-382-8454
TEL: 1-702-382-8444
Email: sales@dollarstoreservices.com
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