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Are Dollar Stores a Threat to Traditional Supermarkets?

Report explores how and why discount retailers are capturing a larger portion of shoppers’ grocery spend and what it means for retailers of all channels
Marian Zboraj, Progressive Grocer
dollar stores
Deep discount retailers like Dollar General, Dollar Tree and Family Dollar are poised to capture even more food and non-food grocery sales.

Grocery is now the top category shopped in the dollar store sector, as found in ChaseDesign’s 2023 Dollar Store Channel Survey, followed by personal care and home goods. It’s no surprise that amid record-high inflation, dollar stores have become a fast-growing retail channel for food purchases, with an 89.7% increase between 2008 and 2020, according to the American Public Health Association

The sector is currently focused on growing its grocery volume through increased store count and shopper visit frequency, with Dollar General adding more than 1,000 net new stores each of the last four years, and Dollar Tree and Family Dollar averaging more than 100 each per year during the same period.

During its fourth-quarter and fiscal year earnings call, Dollar Tree confirmed that it’s ready to accelerate investments in grocery. Part of innovating its merchandising strategy includes adding more space in frozen and refrigerated sections to accommodate consumer demand. Chairman and CEO Rick Dreiling said that the company has been aggressively expanding its $3, $4 and $5 frozen and refrigerated product across the Dollar Tree store base, going from 0 to 3,500 stores in 2022.

“Where people buy their groceries today is evolving quickly. Dollar stores are getting an increasing amount of their sales from packaged, fresh and frozen foods, and they’re capturing those revenues from traditional retailers like supermarkets and mass merchants. This emerging competition needs to be top of mind for those retailers as they strategize how, when and where to engage their shoppers,” said Joe Lampertius, president of New York-based ChaseDesign.

Lampertius added that mainstreaming of dollar stores is taking place. In fact, shoppers said that national brands are already about half of their purchases and that they want more frozen foods (51%), more national brands (47%), and more beauty and personal care brands (35%). Dollar General is already incorporating a new store layout to create an affordable “beauty destination” in its stores. Rather than seeing these stores as a no-frills alternative to larger grocery stores, shoppers are looking for them to resemble their larger rivals more closely.

“A key challenge retailers in this space need to overcome is the way their stores are organized and how categories are presented, as many customers find the experience challenging to navigate. In fact, nearly three-quarters of respondents mentioned lack of organization, navigation and clutter as a challenge to their experience at dollar stores,” said Lampertius.

The ChaseDesign survey also found that while food and related categories are the most shopped at dollar stores, trips to these locations are most often fill-ins for immediate need and not primary stock-up shops.

Additionally, the digital experience of dollar stores is seen as less central to the shopping experience. A majority of shoppers never even use dollar store retailer shopping apps, nor do they order products online, which is quite different from the mainstream grocery and mass channels. According to ChaseDesign, this is a clear area of opportunity for the major players in this channel.

Traditional grocers are also trying to capture their grocery sales back from discount retailers by offering more store-brand options. According to Placer.ai research, consumers who switched to dollar stores and superstores may return to grocery stores as food retailers expand and promote their private label product lines that are priced competitively. The firm’s first-quarter report concluded, “Despite the economic headwinds, there is still room for growth in the grocery space.”

Coresight Research’s analysts agree. According to the New York-based company’s latest report, store brands accounted for 18.2% of total U.S. food and beverage sales as of Feb. 19, up from the 17.4% for the entirety of 2022. The report highlighted several categories and products with notable private label growth, including coffee creamer, fresh eggs, refrigerated pizza, sugar, butter and vinegar.

As of March 3, Goodlettsville, Tenn.-based Dollar General operated 19,147 Dollar General, DG Market, DGX and pOpshelf stores across the United States, and Mi Súper Dollar General stores in Mexico. The company is No. 15 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America. Chesapeake, Va.-based Dollar Tree operated 16,340 stores under the Dollar Tree, Family Dollar and Dollar Tree Canada banners across 48 states and five Canadian provinces as of Jan. 28. The company is No. 29 on The PG 100.


The ChaseDesign fielded an online survey in March 2023 through its proprietary research platform, mPulse, amongst 1,000 consumers between the ages of 25-54. Respondents were screened to be the primary or secondary shopper in their households. 

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