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Dollar store competition in food is small but growing

(Photo by Greg Johnson)

LAS VEGAS—Grocery store closures were the highest in 20 years in 2019—but that wasn’t true for one segment of retail. In 2019, dollar store formats grew 5 percent.

That would seem to make them an increasing competitor to the conventional retailer.

David Portalatin, food industry advisor at NPD Group, said in a National Grocers Association annual convention workshop February 23 that dollar stores still have a long way to go to compete in food.

“Eighty percent of dollar store shoppers buy food and beverage there,” he said, “but only 1.6 percent of food and beverage spend is in dollar stores.”

Fresh produce is even smaller, he said, but dollar stores are increasing their produce offerings.

He said retailer should offer competitive efforts against dollar stores, but it’s important to keep in mind who the dollar store customer is.

Dollar store customers tend to have children in the home and larger families index higher. Shoppers also index higher with lower income levels and rural versus urban, according to NPD research.

Portalatin said 33 percent of all adults said they shopped in dollar stores in the last 30 days, compared to 99 percent who said they shopped in supermarkets, 70 percent in mass merchandisers and 43 percent in warehouse stores.

He said there are five key areas to compete with dollar stores:

  1. Frictionless commerce
  2. Leverage fresh
  3. Provide affordable family meals
  4. Offer snacks and beverages
  5. Offer prepared foods

“How are your prepared foods solving dollar store customers’ need for convenience?” he asked the audience of independent retail store operators.

Greg Johnson is the Director of Media Development for Blue Book Services.