Merchant Innovation

Why Dollar Stores And Fresh Groceries Won't Spoil

Dollar Stores Are The New Grocery Stores

Online retail has taught merchant and consumer alike a pertinent lesson for the age of digital retail: Everything might have a price, but the quest for the ultimate bargain means it can always be lower.

The effects of this new shopper ethos are widespread, and while more and more retailers try to give consumers what they think they want (i.e., coupons, promotions and sales — oh my), it's increasingly been shoppers themselves who have turned away from luxury-priced brands in favor of a dollar-store mentality.

But every trend and force eventually meets its trying test, and for the recent surge in dollar-store love, the next big barrier is an all-too-common one: fresh food.

The story starts with a somewhat out-of-the-blue move from leading discount retailer Dollar General. The chain announced on Wednesday (June 27) that it had finalized the purchase of 41 former Walmart Express stores across several states. Originally used as a mini-store concept by the mega-retailer, the Walmart Express stores are already equipped with many of the amenities Walmart used to stock and sell its fresh groceries — crisping stations, cooling shelves, fridge cases and more.

"Dollar General is excited to add these locations to our existing store base," CEO Todd Vasos said in a statement. "We look forward to the opportunity to better serve our customers in these communities by continuing to provide the convenience and value they expect from Dollar General."

Whether or not dollar retail's shoppers expect anything on the fresh grocery front remains to be seen, but there are promising signs out in the wild that make Dollar General's decision not quite so harebrained as it first might seem.

First, the normally fickle American shopper has shown a greater proclivity for cheap meat over the expensive stuff. A report presented at the 2016 Annual Meat Conference found that, while just 3 percent of consumers had purchased meat products from a dollar store in 2015, that figure spiked to 7 percent for 2016.

This comes as the share of meat purchases at supermarkets is falling from its high-water mark of 65 percent a few short years ago to its current tally of 53 percent.

If that was the only thing going for dollar retail's fresh food gamble, then it'd be right, good and just to question the feasibility of the idea. However, Baby Boomers and the supermarket culture they grew up with are quickly moving out of the circle of power as far as consumer spending is concerned, and the millennials replacing them might not care very much where their fresh groceries come from — just that they're cheap.

Data from Nielsen via Reuters shows that the number of millennials under 35 years of age who frequented dollar stores grew at twice the rate that the demographic did for all retail stores. What's more is that these millennials are far from penny pinchers. Nielsen looked at earners over $100,000 per year, proving that the appeal of the dollar store lies in something other than the Spartan-esque frugal lifestyles its prices can provide.

"As years passed and my family grew, I realized I could buy the same items at a dollar store for a fraction of the price," one 35-year-old millennial with a $150,000 income told Reuters.

To think that dollar stores are somehow going to tap into a network of cheap yet organic produce and meat is to suspend disbelief a little too much on what the average consumer will shell out for. However, if Dollar General and others can get the quality of their nascent food operations to approach what customers perceive a fair price point to be, the data shows that those shoppers are hungry for deals.

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