The low-cost retailer wants to be a player in the $5 or less treasure hunt space.
In a time where inflation worries and rising costs have pushed many Americans to do everything from canceling their holiday trips to scaling back on gifting, buying household items cheaply sounds more appealing than ever.
Although retailers still saw plenty of foot traffic for the notoriously popular shopping celebration known as Black Friday, many are still considering ways to enjoy the holidays without canceling the tradition of gifting altogether.
However, a gift doesn’t have to be big to be meaningful — especially if the shopper gets that delightful feeling of having found a treasure at a good value.
Take one look at Target’s (TGT) – Get Free Report Bullseye Playground, or “Dollar Spot” as some call it, to see this in action. With hundreds of well-curated, aesthetically pleasing choices under $5, Target has elevated the concept and made it appealing to shoppers in a brand-new way.
With more folks turning to discount stores like Dollar General (DG) – Get Free Report and Five Below (FIVE) – Get Free Report for everything from household staples to small gifts, one chain is taking a page from Target’s playbook to try to recreate that same fun for their own customers.
Dollar General Exploring New Territory
Dollar General has made some moves in 2022 to expand its reach, from servicing its existing customer base as well as attracting new faces. Its healthcare initiative, DG Wellbeing, will be in more than 4,000 of its stores by the end of 2022, not only making health items more affordable for those on tight budgets but also presenting direct competition for retailers like Walgreens (WBA) – Get Free Report and CVS (CVS) – Get Free Report.
The budget retailer has also taken aim at Five Below with its pOpshelf concept, which also offers well-curated goods very reminiscent of Target’s Bullseye Playground selection, for $5 or less. Dollar General launched pOpshelf in 2020 and opened its 100th store in 2022, and it plans to open a total of 1,000 by the end of 2025.
The company faces some challenges. It reported weaker-than-expected earnings during its Q3 earnings call on Dec. 1, causing the stock to slump. But chief executive officer Jeff Owen turned the spotlight to the positive, pointing out that people are still in need of a cost-effective option for their shopping needs.
“With over 75% of the assortment at $5 or less, this treasure hunt offering continues to resonate with customers who are seeking value,” he said. “We continue to be pleased with the sales and margin performance we are seeing from our NCI offering, including market share growth in non-consumable product categories.”
Owen also said customer behavior still reflects a need to be cautious about spending.
“As the economic environment continued to evolve during the quarter, we remain focused on serving the needs of our core customer,” he said. “We continue to see customer behaviors in Q3 that we believe indicate they are feeling increased financial pressure, including reductions in the number of items purchased per basket and in discretionary spending, which was softer than anticipated during the quarter.”
The retailer is also seeing a new kind of customer — one that may not have shopped there in the past.
“Importantly, we are growing more productive with our core customer, as well as seeing an increase in customers with annual household incomes up to $100,000,” he said.
