After curtailing frivolities failed to protect Americans from rising prices, many are turning to discount chains for their food needs.
According to a report by InMarket, average spending on groceries at discount chains jumped 71% between October 2021 and June 2020, with spending on the same items at grocery stores dropping 5%, noted The Wall Street Journal (1st of August).
The Commerce Department’s statement that consumer spending rose 1.1% in June from 0.3% in May indicates that all consumers are paying more for their typical items. However, inflation hits some harder than others.
Discount chains such as Dollar General have raised their sales forecasts as Americans in low- and middle-income brackets find new ways to stock their pantries.
Dollar store vs. grocery store
“Dollar stores are our fastest growing segment,” said Brett Rose, founder and CEO of United National Consumer Suppliers, an international wholesale distribution company supplying products to Dollar Tree and its subsidiary Family. Dollar. “They are strategically placed globally, not just in low-income areas or food deserts. However, their smaller footprint and agility give them the ability to turn around quickly and meet the needs of their customers in their communities.
“You can find a deal on a wide variety of items such as a frozen pizza, a gallon of milk, or a notebook.”
A Dollar Tree spokesperson said The Wall Street Journal that the chain seeks to complement, not replace, grocery stores. Although stores often do not carry fresh produce, most of the 16,162 stores carry frozen fruits and vegetables. This is one of the reasons why some critics claim that discount stores can exacerbate food deserts.
However, of the 18,000 Dollar General locations, around 2,300 fresh produce is stocked with hopes of increasing that number to 10,000 soon, according to a company spokesperson.
Digital tools support dollar store growth
Even when fresh produce is available, Sean Turner, co-founder and chief technical officer of Swiftly Systems, pointed out that inflation-ridden consumers are opting for frozen foods and generic brands.
Turner also sees consumers shopping for the lowest price, putting more charges on credit cards and using more digital coupons — up to 40% more at some chains.
“Buyers are becoming much more planned in their purchases and much more intentional in what they buy,” Turner said. “When the economy was really strong and people had more cash on hand, people spent less time trying to optimize on ‘how can I save as much as possible?’
“But now people are investing that time to get value for money…” Turner added.