October 10, 2013
Dollar Stores Fight Negative Perceptions
Pretty much everybody loves a deal (except maybe that baby in the commercial with Jimmy Fallon) and the desire to save money has fueled growth in the dollar store channel going back to even before the Great Recession. New research from Mintel projects continued growth for dollar stores as the channel increases its footprint and chains add name brands trusted by consumers.
Among all dollar store shoppers, 78 percent point to store location as the primary reason for shopping while 74 percent cite price. Fifty-nine percent say dollar stores are a "pleasant" place to shop and 54 percent believe brand and product quality in the channel is as good as that found in other outlets.
Consumers with the most negative view of product quality in dollar stores are those living in affluent households, reports Mintel. Only 34 percent of consumers in households with over $150,000 in annual income think the items sold in dollar stores are on par with other channels.
As has been widely reported in the past, affluent consumers are a small, but important shopping segment for the channel. Fifty percent of consumers in $150,000+ households are currently shopping in the channel the same as last year, while only 10 percent are shopping more.
"Some consumers do have a perception of lesser quality offered at these retailers, thus choosing other channels," said Ali Lipson, senior retail & apparel analyst at Mintel, in a statement. "In order to reverse this perception, dollar and discount stores need to promote brand name offerings to those who are unaware that well-known brands are offered at these stores."
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Discussion Questions
Should dollar stores be concerned with changing negative perceptions about the channel? How should they go about reversing these opinions?
Poll
Through years of effective marketing, merchandising and store design, many retailers once considered “bottom feeders” have undergone a perception change. Discounters like Target (and even Walmart), off-pricers like TJMaxx and outlet malls have given more affluent customers “permission” to cross-shop these channels.
The question facing dollar stores is whether they are interested in these kinds of strategies, or whether they risk losing the clear brand position attracting the most value-oriented customers in the first place.
The good news is that dollar stores were designed to convey the image of low prices. The bad news is, it worked. The channel is perceived to be a low-cost retailer. This also created the perception of lower quality for the goods it sells.
As the channel migrates from being a place to go on a treasure hunt to being a staple part of the consumers consideration set for CPG items, it will have to upgrade its image to match the quality of the goods it now seeks to sell. This is also true as the channel seeks to be a strong competitor to the c-store channel, which is improving its image with newer, larger stores and an increased emphasis on foodservice.
Dick’s comment is spot on. The leading value chain operators ARE making the necessary investments in infrastructure and support to become shopping destinations. And, with increased merchandise assortment and an enhanced in-store experience, I believe the dollar channel will continue to prosper.
Every retailer needs to be concerned about negative perceptions and should work to change them. Dollar stores do have perception problems with more affluent consumers, whether it’s the quality of merchandise or the cleanliness of the stores.
These complaints can be combatted by committing to quality produce, reviewing and changing package graphics, and guaranteeing that their private label products are on par with national brands.
People originally had negative perceptions about Walmart too, but the low prices were too attractive to pass up, even for upscale people.
For one thing, they need to clarify their positioning in the marketplace. I’d like to see them lose the term “Dollar Stores” and graduate to “neighborhood value” stores.
One shops at a “dollar” store for the value, and that is what you get. No frills included, and no customer service. There’s not enough staff to run the store, much less expect to get good service with it.
I am one of those who feel the quality is not up to par with other channels. But why do I want to spend $5.00 for a birthday card when I can spend $1.00?
In this case “perception” is the result of positioning. And it has been a successful positioning for the dollar stores. However, when a brand or a retailer seeks to change positioning, there is a risk of: 1. losing current customers as they seek new customers; 2. becoming a mish-mash in shoppers’ minds and not standing for anything; or, 3. leaving a void in the positioning for others to take.
Are the upscale shoppers really worth the risk?
Is it broken? Why should a successful business change to pursue a model of being attractive to everyone? If dollar stores do a lively business for those who want to shop for good products at low prices and that’s a viable customer base, should they leave it alone? There’s a risk in trying to appeal to a different demographic in that your core customer may decide to leave instead.
I have conflicting thoughts on this. On the one hand, my first reaction would be “Don’t focus on low prices, emphasize the quality and thus inherent value of the goods.” On the other hand, marketing 101 would say “Know your target group and income level and don’t try to please everyone.” I mean, households worth 150K don’t think much of dollar stores? Hardly news. The truth might be the middle ground: focus on value but also focus on who your target customer/income level is. You can’t please everyone….
You can not offer produce or specialty items without hiring anyone. They are bare bones in service, and if you add these departments, which in no way guarantees anything, the concept will fail. They are a quick in and out store with different smaller packages at deal prices, and that is what they’re good at.
Location, location, location. I too used to have a negative perception of dollar stores, but there’s one located right next to my local pharmacy. I went in there a couple of times, and found the store had the items I needed and saved me a trip to the supermarket for a bottle of laundry detergent.
My point here is that seeing is believing. The dollar store look is improving inside, and good locations give people an opportunity to take a look.
In addition to the “quality of goods” perception, dollar stores are armed robbery magnets. They are primary targets. That’s not going to do much for your shopping experience is it?
Look at where roughly 3/4 of dollar stores are located. Some locations are inline centers, retail corridors. But by far the majority of their new stores are in lower income neighborhoods — not positioned within a retail hub. And they pick these locations for good reason — that’s the core customer base.
These stores are in effect, c-stores and, as with c-stores, they’re smaller sized making for quick entrance/exit close to registers. They have few onsite employees, and most purchases are probably cash. And again, most of their locations are prime targets by proximity or immersion to low income neighborhoods and/or being positioned with few other neighboring retail or traffic generators around. And of course they’re open until 9 or 10 PM.
So the crime angle is one more element I would consider when assessing the negative perception of the channel and most specifically the 18,000 or so Family Dollar and Dollar General stores out there.
As one of the frugal “millionaires next door,” I have a neutral perception of dollar stores because for the most part, the value they offer doesn’t justify a separate shopping trip. One exception – the one down the street from me has great greeting cards for less than $1 – comparable to those costing $4 or more at Target.
Dollar stores should be more concerned about something they can’t control and that, according to the numbers, is a significant traffic driver: the location advantage. Fresh & Easy has new ownership (with something to prove), Walmart is pushing the accelerator on small formats, drug stores are morphing into convenience stores, and non-U.S. convenience concepts are encroaching. Dollar stores aren’t always cheaper than non-dollar stores because up to now they haven’t had to be thanks to the power of proximity. As others hang shingles, the jig will be up.
Some of these stores have grown profitably by leveraging the successes of other discounters’ messaging strategies along the lines of “cheap chic.” We can think of at least one, if not more discounters that are very attractive to higher-income groups because their advertising is hip, high-end and compelling. The physical store then needs to mirror that feeling when the shopper enters the store.
I think there is a true opportunity for these stores to make huge gains in 2014 whether the economy recovers further or not.
Given that we are regularly shown (here on RW) articles telling us that dollar stores are no longer stigmatized, and everyone shops there, I would think the answer to this would be a clear “no!”
As for the assertion that “affluent consumers are a small, but important shopping segment for the channel,” I don’t see how that can be. “Small” is only important if you make up for this in quantity (buying) or influence, but neither applies to this channel…is a one-percenter going to buy more toothpaste than a poor household? No.
Who has a negative perception? I don’t think anyone does except the retailers losing business to the dollar stores.
And while we are at it lets get this straight – a dollar store is not Dollar General or Family Dollar. A dollar store is a retailer where all merchandise is priced at one dollar or less. The media seems to want to lump both of the above concepts under one roof and expect/apply uniform expectations.
I think the dollar stores and the small footprint discount retailers are too smart to even worry about someone’s “negative” perceptions. Both know that as long as they provide the right mix of product, price and service they will do well. The failure of competitors to provide the right mix is what has driven business to them. I don’t think they will “drive it back”! Retailers who lost business must earn the trust of their former consumers if they are to regain anything they lost. Again, with regards to “these opinions,” I don’t think they are held by anyone who currently shops in either of these concepts and all seem to be doing okay without them.
It is impossible to be desirable to every part of the market. To a great degree, the “negative perception” does not matter. People that do not have to go there will not, and people that don’t want to go there will, if they must, by budget limitations. That then becomes competition among the dollar stores, and perhaps Walmart.
I think dollar stores are in a great position. I travel somewhat and often to not-glorious destinations and let me assure you, in some of those destinations, a lot of people are hurting and the economy is – well – bad. Dollar stores will likely NEVER attract affluent customers – plain and simple – and it does not matter. They do not have to. As long as they conduct their business well, they will always have their place and will exist. Woolworth’s, Kresge’s, H L Green and WT Grant may not be around anymore, but the current crop seem to be holding their own for now, and if necessary, others will replace them if they lose track of what they are doing and who their customer is.
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Through years of effective marketing, merchandising and store design, many retailers once considered “bottom feeders” have undergone a perception change. Discounters like Target (and even Walmart), off-pricers like TJMaxx and outlet malls have given more affluent customers “permission” to cross-shop these channels.
The question facing dollar stores is whether they are interested in these kinds of strategies, or whether they risk losing the clear brand position attracting the most value-oriented customers in the first place.
The good news is that dollar stores were designed to convey the image of low prices. The bad news is, it worked. The channel is perceived to be a low-cost retailer. This also created the perception of lower quality for the goods it sells.
As the channel migrates from being a place to go on a treasure hunt to being a staple part of the consumers consideration set for CPG items, it will have to upgrade its image to match the quality of the goods it now seeks to sell. This is also true as the channel seeks to be a strong competitor to the c-store channel, which is improving its image with newer, larger stores and an increased emphasis on foodservice.
Dick’s comment is spot on. The leading value chain operators ARE making the necessary investments in infrastructure and support to become shopping destinations. And, with increased merchandise assortment and an enhanced in-store experience, I believe the dollar channel will continue to prosper.
Every retailer needs to be concerned about negative perceptions and should work to change them. Dollar stores do have perception problems with more affluent consumers, whether it’s the quality of merchandise or the cleanliness of the stores.
These complaints can be combatted by committing to quality produce, reviewing and changing package graphics, and guaranteeing that their private label products are on par with national brands.
People originally had negative perceptions about Walmart too, but the low prices were too attractive to pass up, even for upscale people.
For one thing, they need to clarify their positioning in the marketplace. I’d like to see them lose the term “Dollar Stores” and graduate to “neighborhood value” stores.
One shops at a “dollar” store for the value, and that is what you get. No frills included, and no customer service. There’s not enough staff to run the store, much less expect to get good service with it.
I am one of those who feel the quality is not up to par with other channels. But why do I want to spend $5.00 for a birthday card when I can spend $1.00?
In this case “perception” is the result of positioning. And it has been a successful positioning for the dollar stores. However, when a brand or a retailer seeks to change positioning, there is a risk of: 1. losing current customers as they seek new customers; 2. becoming a mish-mash in shoppers’ minds and not standing for anything; or, 3. leaving a void in the positioning for others to take.
Are the upscale shoppers really worth the risk?
Is it broken? Why should a successful business change to pursue a model of being attractive to everyone? If dollar stores do a lively business for those who want to shop for good products at low prices and that’s a viable customer base, should they leave it alone? There’s a risk in trying to appeal to a different demographic in that your core customer may decide to leave instead.
I have conflicting thoughts on this. On the one hand, my first reaction would be “Don’t focus on low prices, emphasize the quality and thus inherent value of the goods.” On the other hand, marketing 101 would say “Know your target group and income level and don’t try to please everyone.” I mean, households worth 150K don’t think much of dollar stores? Hardly news. The truth might be the middle ground: focus on value but also focus on who your target customer/income level is. You can’t please everyone….
You can not offer produce or specialty items without hiring anyone. They are bare bones in service, and if you add these departments, which in no way guarantees anything, the concept will fail. They are a quick in and out store with different smaller packages at deal prices, and that is what they’re good at.
Location, location, location. I too used to have a negative perception of dollar stores, but there’s one located right next to my local pharmacy. I went in there a couple of times, and found the store had the items I needed and saved me a trip to the supermarket for a bottle of laundry detergent.
My point here is that seeing is believing. The dollar store look is improving inside, and good locations give people an opportunity to take a look.
In addition to the “quality of goods” perception, dollar stores are armed robbery magnets. They are primary targets. That’s not going to do much for your shopping experience is it?
Look at where roughly 3/4 of dollar stores are located. Some locations are inline centers, retail corridors. But by far the majority of their new stores are in lower income neighborhoods — not positioned within a retail hub. And they pick these locations for good reason — that’s the core customer base.
These stores are in effect, c-stores and, as with c-stores, they’re smaller sized making for quick entrance/exit close to registers. They have few onsite employees, and most purchases are probably cash. And again, most of their locations are prime targets by proximity or immersion to low income neighborhoods and/or being positioned with few other neighboring retail or traffic generators around. And of course they’re open until 9 or 10 PM.
So the crime angle is one more element I would consider when assessing the negative perception of the channel and most specifically the 18,000 or so Family Dollar and Dollar General stores out there.
As one of the frugal “millionaires next door,” I have a neutral perception of dollar stores because for the most part, the value they offer doesn’t justify a separate shopping trip. One exception – the one down the street from me has great greeting cards for less than $1 – comparable to those costing $4 or more at Target.
Dollar stores should be more concerned about something they can’t control and that, according to the numbers, is a significant traffic driver: the location advantage. Fresh & Easy has new ownership (with something to prove), Walmart is pushing the accelerator on small formats, drug stores are morphing into convenience stores, and non-U.S. convenience concepts are encroaching. Dollar stores aren’t always cheaper than non-dollar stores because up to now they haven’t had to be thanks to the power of proximity. As others hang shingles, the jig will be up.
Some of these stores have grown profitably by leveraging the successes of other discounters’ messaging strategies along the lines of “cheap chic.” We can think of at least one, if not more discounters that are very attractive to higher-income groups because their advertising is hip, high-end and compelling. The physical store then needs to mirror that feeling when the shopper enters the store.
I think there is a true opportunity for these stores to make huge gains in 2014 whether the economy recovers further or not.
Given that we are regularly shown (here on RW) articles telling us that dollar stores are no longer stigmatized, and everyone shops there, I would think the answer to this would be a clear “no!”
As for the assertion that “affluent consumers are a small, but important shopping segment for the channel,” I don’t see how that can be. “Small” is only important if you make up for this in quantity (buying) or influence, but neither applies to this channel…is a one-percenter going to buy more toothpaste than a poor household? No.
Who has a negative perception? I don’t think anyone does except the retailers losing business to the dollar stores.
And while we are at it lets get this straight – a dollar store is not Dollar General or Family Dollar. A dollar store is a retailer where all merchandise is priced at one dollar or less. The media seems to want to lump both of the above concepts under one roof and expect/apply uniform expectations.
I think the dollar stores and the small footprint discount retailers are too smart to even worry about someone’s “negative” perceptions. Both know that as long as they provide the right mix of product, price and service they will do well. The failure of competitors to provide the right mix is what has driven business to them. I don’t think they will “drive it back”! Retailers who lost business must earn the trust of their former consumers if they are to regain anything they lost. Again, with regards to “these opinions,” I don’t think they are held by anyone who currently shops in either of these concepts and all seem to be doing okay without them.
It is impossible to be desirable to every part of the market. To a great degree, the “negative perception” does not matter. People that do not have to go there will not, and people that don’t want to go there will, if they must, by budget limitations. That then becomes competition among the dollar stores, and perhaps Walmart.
I think dollar stores are in a great position. I travel somewhat and often to not-glorious destinations and let me assure you, in some of those destinations, a lot of people are hurting and the economy is – well – bad. Dollar stores will likely NEVER attract affluent customers – plain and simple – and it does not matter. They do not have to. As long as they conduct their business well, they will always have their place and will exist. Woolworth’s, Kresge’s, H L Green and WT Grant may not be around anymore, but the current crop seem to be holding their own for now, and if necessary, others will replace them if they lose track of what they are doing and who their customer is.