Two of the biggest challenges for dollar stores in the produce category are controlling costs and shrink.
Bill Bishop, chief architect and co-founder of Brick Meets Click in Barrington, IL, says everything from maintaining proper temperatures to culling less-desirable items requires staff and training.
“These are expenses and it’s not cheap,” he says. “When it comes to produce in dollar stores, there are very substantial differences between the stores and their ability to execute.”
Category analysts believe innovation is key for dollar stores to compete with supermarkets on fresh produce.
Bishop says packaging options could be leveraged for more produce sales, while storage methods can be tweaked to allow dollar stores to control costs and make it more affordable to handle fresh produce while maintaining quality.
“At a store like Mariano’s, you have a team of people taking care of produce at all times,” he says. “That’s not going to happen at a dollar store.”
In some cases, the look of the produce department can be off-putting for customers accustomed to shopping in grocery stores.
Julie DeWolf, founder and CEO of DeWolf Marketing BB #:376983 in Redondo Beach, CA, cites fixtures, signage, and lighting as areas of concern. “If [dollar stores] gave it a bit more attention, they would do better—it doesn’t have to cost a lot to merchandise better.”
Phil Lempert, founder of SupermarketGuru.com, based in Santa Monica, CA, has another take on appearance: “Dollar stores are accommodating a much broader audience than they did, and there’s less of a stigma,” he explains, but he says there still is a stigma, which he attributes to storefronts.
“Until you see stores upgrade their exteriors, that will continue to be true.”
While more attractive exteriors may lure some new customers to dollar stores, delivery options are proving to be a better enticement.
Although Instacart was already providing same-day delivery for dollar store customers, a new service, Dollar Store Hub, was announced in November 2021. The service was available for 14,000 stores, including 6,800 Dollar Tree locations and almost as many under the Family Dollar name.
Instacart also inked deals with 99 Cents Only Stores and deep discounter Five Below stores.
Dollar General also launched same-day delivery from 9,000 of its stores in late 2021 through DoorDash, expanding to 10,000 by year-end. A pilot last summer encompassed 600 stores in both rural and metropolitan areas.
Dollar General also offers a click-and-collect service under the DG Pickup brand and a recurring order-and-delivery system called DG AutoDeliver.
Having been in the produce category much longer than the “big three,” 99 Cents Only utilizes many traditional grocery merchandising techniques and continues to make improvements.
“As we look to grow our brand, expand our stores, and update our fleet, we’re investing in new and updated fixtures, dedicating additional floor space for fresh fruit and vegetables, and looking at category development opportunities to capitalize on consumer trends like farm-to-table and wellness,” says Matthew Delly, senior vice president of food and beverage for 99 Cents Only Stores BB #:189237, headquartered in City of Commerce, CA.
This is an excerpt from the cover story of the March/April 2022 issue of Produce Blueprints Magazine. Click here to read the whole issue.
