Over the past year or two, dollar stores have seen a steep growth in sales, earnings and stock prices. Five Below, Dollar General, and Dollar Tree are the new retail brands that redefine the category in the United States these days.
What Daiso is in Japan and Korea, dollar stores are in the United States. Five Below, Dollar General, and Dollar Tree offer a wide range of daily necessities ranging from foodstuffs to clothing, beauty and hygiene products, home appliances, and home accessories.
This new breed of dollar store is particularly popular among Generation Z consumers. U.S. dollar stores´ sales have increased significantly since the third quarter of 2018.
The concept is to provide a "treasure hunt" experience for shoppers to find things that they didn´t expect. The customer who walks into the store without any need or purchase purpose is led to find out what is useful and buy the item that he always wanted to buy but never knew.
How can the dollar store sell low enough to promise less than $ 1 per product? One of the secrets is "private labeling", a retail strategy that is already widely used by major supermarket companies, if it is Spar or Tesco in Europe, Costco or Trader Joes in the US, or well as E-Mart or Lotte Mart in Korea. With private labeling, distributors have the advantage of being able to manage their margin more efficiently by minimizing the involvement of intermediaries and receiving products directly from producers. Reducing the price for consumers leads to an increase in sales. The leverage for price and brand positioning are also useful strategies to contain existing competitors.
The low-cost private label products offered by dollar stores are especially popular among Generation Z consumers who are sensitive to price, and young people have little preference or loyalty to famous brands compared to previous generations of consumers.
Instead, the new generations of consumers are more inclined to weigh the performance and utility of the product and to make more informed decisions about environmental and social issues, such as whether the product is healthier or less harmful to the environment.
US dollar stores also leverage innovative social media marketing to directly appeal to their main customers. An emotional marketing style with using plenty of emojis has become a new standard. As emojis have become a global language, they is widely used for social media marketing for teens and young consumers who often communicate by lining up pure emojis without any text.
The diagnosis that the era of the traditional "brick and mortar store" era has ended through the widespread use of online retail platforms and delivery services may be premature. In the past, the $ 1 discount store was concentrated in poor areas and suburbs, where people and businesses were scarce. Now, dollar stores have opened over 100 new outlets every year since 2017, and they continue to expand with an annual sales growth of 20%.
The retail and retail industries are changing fast. It is now time to enter into an new branding era where trendy, unnown or lesser-recognized brands are more “chic” to buy, regardless of income level or class.
In order to cope with the distribution war led by the $ 1 store, ready-made retailers are also launching their own low-cost product lines. The photo shows the Smartly line of beauty and hygiene products for less than $ 2 per item at Target. Courtesy: Target.
The $ 1 store's sales strategy is simple. Product lineups are brief, cheap, and reduce operating costs by minimizing display and staffing. The strategy is to tailor the main items according to the economic level and taste of the neighborhood where the store is located. Courtesy: Dollar General Corporation.
Dollar General's discount stores utilize a vivid labeling strategy that clearly identifies its brand, including the DG Home and the DG Health product line. Bright product and packaging designs focusing on primary colors have changed the consumer perception that discount stores are basic and ugly. Courtesy: Dollar General Corporation.
Five Below, aimed primarily at teens and under- twenties, sells all its branded products for less than $ 5. Image: Five Below-Instagram.
Dollar Tree utilizes emotional marketing targeted at Millennials and Generation Z consumers. Courtesy: Dollar Tree-Twitter.
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