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store shopping hero Discount, dollar stores show strength at year end

Discount and dollar store chains performed remarkably well in H1 2023, and the strength has mostly continued into the second half of the year as many of the chains expanded their footprints, per

Discount and Dollar stores have been one of the few retail segments to benefit from an economy feeling the after-effects of the pandemic and persistent inflation. The segment performed well in Q2 2023 – how is it holding up as the year winds down and the closely-watched holiday season begins? 

After examining visitation patterns of five major chains to find out, said that discount and dollar store chains performed remarkably well in H1 2023, and the strength has mostly continued into the second half of the year as many of the chains expanded their footprints. 

Visits to Dollar Tree, Five Below and Ollie’s Bargain outlet were particularly strong, with year-over-year positive foot traffic for all months examined. 

Dollar Tree’s growth is especially impressive given its significant visit share of 40.6% of total visits to the five discounters examined. Meanwhile, Five Below and Ollie’s captured just 8.1% and 2.2% of the visit share, respectively. So, while the two discounters have experienced impressive visits for all months analyzed, their relatively smaller footprint makes growing visits easier than for stores with massive fleets, said. 

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Visits to Dollar General remained more or less on par with 2022 levels, while Family Dollar (owned by Dollar Tree) did experience some YoY declinesbut this might be attributed to a particularly successful 2022 and not indicative of any real decrease in the chain’s popularity among bargain seekers. Dollar General claims 37.4% of the visit share, demonstrating its resilience in maintaining visit levels despite increasing competition and highlights its strong position within the segment. 

Cross-shopping trends can help discount and dollar stores better understand their audience and make inventory decisions. All five chains analyzed had high cross-shopping patterns with Walmartunsurprising given Walmart’s ubiquity and affordable price point. In Q3, 2023 81.1% to 91.7% of visitors to the analyzed discount and dollar chains visited Walmart at least once during the period examined (April-October 2023.)

But while Walmart is the top competitor across all discount chains, looking at the chains that are "lower" on the cross-shopping list sheds light on consumer preferences. Target, another perennial favorite across many shoppers, experienced much more divergence in its cross-shopping patternsonly 42.2% of Family Dollar shoppers also visited a Target during the period examined, compared to 72.5% of Five Below shoppers. 

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The variance in visit share among different discount chains may be related to the differences in the median household income within the trade area of each brand. Residents of Five Below’s trade area tend to have the highest median HHI of the five brandsand Five Below also had the largest share of visitors cross-shopping with Target. Meanwhile, Family Dollar visitors tended to come from areas with the lowest HHIand Family Dollar visitors also tended to shop the least at Target.

The discount and dollar stores segment continues to thrive despite—or perhaps thanks to—the ongoing economic headwinds, highlighting the continued appeal of budget-friendly retailers. 

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