Nielsen: Dollar stores a destination for basic household products in recession

ORLANDO, Fla. The economic downturn has been a boon to dollar stores, which attracted increased consumer spending in 2008, including spending among high and middle income shoppers, according to a report issued by The Nielsen Company on Tuesday.

Nielsen’s analysis of consumer shopping habits shows consumers at all income levels shopping more at dollar stores, with high income shoppers spending 18% more at dollar stores in the second half of 2008, compared with the prior year.

Dollar stores are outpacing major consumer packaged goods channels among both low and high income shoppers. According to Nielsen, an estimated 65 million U.S. consumers shopped at dollar stores in 2008.

“The troubled economy and rising costs in healthcare, education and food have caused everyone -- even those with high incomes -- to rethink where they purchase basic household goods,” stated Jeff Gregori, VP retail services for The Nielsen Company. “Five years ago, shoppers weren’t sure what they would find in a dollar store. Today, dollar stores are delivering more consistent selection and value, and consumers are shopping dollar stores more regularly to fulfill their basic CPG needs.”

However, despite the increase in spending among high and middle income shoppers, low income shoppers are still the primary dollar store customer. According to Nielsen’s research, 45% of dollar store sales are from low annual household incomes (below $30,000), 47% from middle incomes (between $30,000 and $99,900), and only 8% from high incomes (greater than $100,000).

The most loyal dollar store customers tend to have low incomes and live in small towns and rural areas or in urban centers. Senior couples, senior singles (particularly widows) and younger families with children are more likely to shop in dollar stores only occasionally, relying on other retail channels to meet the rest of their household needs.

In terms of products, dollar stores have become a regular shopping destination for everyday household staples. Among those who regularly shop at dollar stores, the most commonly purchased household items include paper goods, such as napkins and paper towels, detergent, trash bags and cleaning and laundry supplies. The most common edible items are candy, snacks and cookies.

“With more shoppers having positive experiences at dollar stores, there is a significant opportunity for dollar stores and CPG manufacturers to build loyalty and expand into new product categories, such as food and beverages and select health and beauty care,” Gregori said. “There is also a potential growth opportunity in exploring dollar store private label offerings in both edible and non-edible products. The challenge for dollar stores and CPG manufacturers is to get the product mix right to meet the needs of their traditional customers as well as new customers with higher incomes.”