Q&A: Nielsen Retail Analyst Expects Dollar Store Gains to Remain

As the economy began its descent last year, dollar stores and related value retailers already were experiencing increased consumer spending, Nielsen Co. studies demonstrate, with high- and middle-income shoppers contributing in ways that suggest a significant alteration in shopping habits.

In its research, Nielsen takes a broad view of what constitutes the dollar store category. Although many dollar stores still maintain the tradition of offering everything on the shelves for a buck or less, retailers that meet Nielsen’s definition of dollar stores offer products at a range of prices, with only 23 percent of items sold in the sector at or below the one dollar price. Still, the focus on comparatively low prices is drawing shoppers from all income levels, and Nielsen estimates that 65 million U.S. consumers shopped the retailers that constitute its dollar store category in 2008.

The dollar store business has changed, and Jeff Gregori, Nielsen vice president, retail services, tells Bnet that they have been drawing a broader clientele in the recession. Nielsen’s research indicates that 45 percent of dollar store sales are from low annual income households, defied as those earning less than $30,000, 47 percent from middle income, between $30,000 and $99,900, and only eight percent from high income, greater than $100,000. The proportions are changing, however, and the shift is likely to outlast the recession.

Bnet: According to Nielsen research, more people across the income spectrum are shopping the dollar stores category, but how much of a shift has there been by various income echelons?

Gregori: When we isolate dollar channel growth as a result of shopper switching, approximately 47% of growth has come from low income, 32% middle income and 21% high income, respectively.

Bnet: Does the data suggest why this is occurring and is the phenomenon limited to those directly impacted by the recession through job loss in the family, for example?

Gregori: While economic data suggests that lower income households are being hurt the most by the recession in terms of level of unemployment and these shoppers are driving almost half of dollar channel growth from other retailers, the fact that middle- and high-income shoppers are also switching to dollar stores suggests they are preparing for tougher times. Clearly, the switch to dollar stores is not limited to those households just impacted by the recession.

Bnet: What is making value retailers more attractive to people who might not have shopped them before and does the reaction suggest a basic change in consumer shopping behavior?

Gregori: I think the heightened interest in dollar stores goes beyond economic. Yes they offer name brands for less, but they are also easy to shop and very convenient.

Bnet: Does the research suggest that consumers will abandon value retailers after the recession or will they keep shopping at them for at least some of their needs?

Gregori: Only time will tell if shoppers, particularly higher income, will remain with the channel after the economy rebounds. However, dollar stores are doing all of the right things including more aggressively remodeling stores and implementing refrigeration and freezer units to appeal to a broader set of needs. This channel delivers a unique shopping experience based on “value and convenience.” I think that it is highly likely their expanded role with their customers is for the long-term.