More Than 1 in 5 Consumers Buy Groceries at Dollar Stores

These retailers woo inflation-weary consumers with fresh food and low prices.

February 07, 2023

ALEXANDRIA, Va.—The cost of food continues to skyrocket, despite cooling consumer prices on other goods. Consumers, looking for ways to save money on their grocery bills, are visiting their local dollar store, reports CNBC.

Food prices are up 10% over the past year. Eggs are up 60%, the price of butter has inflated 31% and lettuce is up 25%. Dollar stores are meeting inflation-weary customers where they’re at, often in rural locations, and expanding at an unmatched pace, according to CNBC. A Coresight Research report found that more than 1 in 5 consumers buy groceries at dollar stores.

“If [Dollar General and Dollar Tree] continue to improve the quality of their fresh food while maintaining the low prices associated with their brands, there is a high chance it will bolster their value proposition with their existing consumer base and also pull in new customers from higher-priced retailers,” the report said.

According to Peter Keith, a senior analyst for financial-services company Piper Sandler, the expansion of dollar stores shows they can be a success in rural areas that aren’t attractive to big-box retailers. Dollar stores are able to bring national buying power to places where the cost of labor and operations is lower than more urban and suburban areas, he told The Wall Street Journal in a recent article.

“It’s about providing convenience and value to customers that live in more remote areas,” Keith told the Journal. “They really can outcompete the local grocer in a smaller market.”

U.S. consumers are more open to alternatives now, according to Julie Ramhold, consumer analyst with DealNews. “It’s about making your dollar go a little further,” she told CNBC. However, she warns that value isn’t always had at dollar stores, so she advises consumers to check unit price and compare with the offerings at other stores, including Walmart and Trader Joe’s.

Also, the grocery selection at dollar stores is inherently smaller than at grocery stores. For example, the selection of fruits and vegetables may be limited to more shelf-stable offerings like bagged salad mixes and bananas, Ramhold told CNBC. She also said that items could be closer to their expiration dates due to less turnover.

(NACS offers resources for c-store operators to gain new ideas for increasing sales and meeting consumer demand for healthy food choices.)

According to Dollar General CEO Jeff Owens, the company is benefiting from price-conscious consumers, and even customers who make $100,000 a year have been shopping at its stores.

Dollar General is the fastest-growing retailer in the country by store count, according to Coresight. The company now has about 18,800 stores in the United States, compared to the 5,000 it had in 2001. Dollar Tree has more than 16,000 locations, including Family Dollar stores, which the company acquired in 2015.

Consumers are also gravitating toward private labels to save. Private label now accounts for 18% of the spend on consumer packaged goods, up across all income groups.

NACS recently hosted a free webinar on private label trends and their implications on convenience stores. Read more about how c-stores are implementing private labels in their product offer in “An Exclusive Offer” in the August 2022 issue of NACS Magazine.

NACS Magazine also offers tips for retailers battling for market share with dollar stores in “The Buck Stops Where?