Dollar store value proposition increasing in scope and relevance

It's been the week of the dollar store. Dollar General opened store No. 11,000 last week, and Family Dollar continues to reinvent its brand relevance with the consumer as the company posted monster gains for its fiscal fourth quarter and the year, driven by store experimentation, remodels and the introduction 1,000 SKUs, including many health and beauty items. 

With that kind of store front and store brand ubiquity, respectively, the value proposition inherent in this channel has to be appealing to more than those either on government assistance or recently furloughed by the government. 

Because that makes Dollar General the largest CPG retailer in the country, followed by Walgreens. And with Family Dollar elevating the quality perception across its store brand — total sales for private labels increased by about 10% and by 20% for private label consumables — the company has plans in place to introduce about 200 private-label SKUs in fiscal year 2014.

Truth is, dollar stores are shopped by household incomes of all shapes and sizes. So it only makes sense to offer more — more stores and more products. 

According to a recent research report published by Mintel, half of all dollar channel enthusiasts bank more than $150,000 per household. 

It's a confluence of factors that's driving that business — the sluggish economy makes the dollar channel value proposition all the more relevant to today's consumer. And the proliferation of both mainstream brands and higher-quality private label offerings has helped transform what had been a treasure-hunt trip into the dollar store as a destination visit. 

According to Mintel, three-in-four shoppers think that dollar stores are the best deal going, and more than half of consumers have reported the dollar channel shopping experience and price position rival those of retailers outside of the dollar channel. 

And while Family Dollar is augmenting its private label position (what retailer isn't these days?), the dollar operator is still pursuing strategic partnerships with mainstream brands. 

“Retailers are starting to demand customization,” Jocelyn Wong, Family Dollar chief marketing officer, explained to attendees of the 2013 Shopper Marketing Expo. “Retailers are no longer just place[s] where you go to buy things. [They] have become powerhouse brands, and as they start to think of themselves more as brands, there’s a need for greater collaboration [with suppliers],” she said.