“If you can’t beat ’em, join ’em” is now becoming the mentality of many Americans as even those with higher incomes increasingly shop at dollar stores amid high prices and economic uncertainty.
The latest U.S. consumer sentiment survey released this month by EY-Parthenon showed that stores such as Dollar General and Walmart attracted more customers than usual in December, a sign that more people are looking for ways to save money, even if that means shopping at stores they haven’t been to before.
Surveys show that in the past few months, consumers with annual incomes of more than $100,000 have begun turning to dollar stores for discretionary purchases such as home décor, beauty and personal care items, and snacks. Meanwhile, when these shoppers visit larger discount retailers, their spending is more focused on essentials like produce and pantry staples.
“We’re really seeing a mosaic or … an impressionist painting of the economy right now because there are so many moving parts and so much confusing data,” said Will Auchincloss, EY-Parthenon Americas retail leader. retail dive rAbout consumer behavior trends. “I think the most important headline is that … all consumer segments are feeling the impact of inflation and rising costs across many categories.”
Meanwhile, other experts point out that this behavior is not entirely new. In 2021, Dollar Tree, which still owned the Family Dollar brand at the time, went beyond traditional $1 pricing and introduced a multi-price strategy, which not only helped the company protect profits but also attracted high-income customers who were feeling pressured by rising costs. According to a 2023 article in the Rutgers University Business Review, the shift allows Dollar Tree to appeal to a wider range of shoppers while maintaining its low-cost appeal.
According to a recent survey (Getty Images), higher-income households often split their spending, using discount stores for extra items and traditional retailers for essentials
During a May 2023 earnings call, then-Dollar Tree CEO Rick Dreiling said households making around $80,000 were increasingly “downgrading” — choosing Dollar Tree instead of more expensive retailers — and the company began focusing on attracting this group specifically, retail driven Report. Drelling noted that economic conditions, including inflation and rising costs, are driving more affluent consumers toward value-oriented shopping.
Years later, the strategy continues to pay off, with higher-income households making up a growing share of Dollar Tree shoppers.
“We’re growing households across all income groups,” current Dollar Tree CEO Mike Creedon told analysts on an earnings call this month. retail dive Report. “There’s no question that higher revenues do lead to higher multi-prices.”
Experts say if the Iran conflict drives up gas prices, people may change the way they shop because they can’t easily cut gas costs. Unlike other expenses, it will be difficult for consumers to cut fuel costs, which may force people to adjust spending in other areas, including groceries and household supplies.
For discount retailers like Dollar Tree, this environment presents opportunities.
“So prices will impact everyone, but for us Dollar Tree is really a key tool in helping them manage their budgets and deal with these higher prices,” Creedon told analysts, according to media reports.
