At a time when American consumers are looking to save money when they shop, the retail industry as a whole remains bullish on the discount channel. Private label products are playing an ever-growing role within the aisles of dollar stores, according to Progressive Grocer magazine. Leading retailers in the channel have grown their respective assortments in recent years by developing items other than name-brand equivalents. This continued effort is not only providing high-value items to consumers but also offering points of differentiation for each retailer.
For example, when Dollar General launched its proprietary Clover Valley line nearly 30 years ago, it did so intending to carry products that would be equivalent to name-brand items currently available. But as has been seen with many retailers in recent years, the mindset of the dollar store’s merchandise team evolved. “Our customers started telling us they wanted variety and innovation, not only me-too products,” says Jackie Li, SVP of private brands and global sourcing at Goodlettsville, Tenn.-based Dollar General. “We then started developing products that were equal to or better than the national brands.”
VALUE PROPOSITION
New product development has also been key to private label growth at Dollar Tree-owned Family Dollar. At the end of 2023, Rick Dreiling, chairman and CEO of Chesapeake, Va.-based Dollar Tree, reported that private label penetration rates at Family Dollar had reached 14% and that the retailer was on target to hit its penetration rate goal of 20% by 2026. This was even though Family Dollar was shrinking its store count by 600 by the midway point of 2024.
“We believe that as the customer is looking for greater value, they have more options within our private brands,” said Dollar Tree CFO Jeff Davis. “It’s an opportunity for us to improve our margins. And, to the extent that there is sort of price deflation, there’s an opportunity to provide even more value as we think about how we sort that particular product line.”
CHALLENGES FOR DISCOUNTERS
While an economy that has a larger number of price-sensitive consumers would seem to favor dollar stores and the value proposition they offer, there are challenges facing these retailers. One such challenge is keeping store shelves stocked with items that are priced at or near the magic $1 threshold. Not meeting or coming close to this key price point could make these retailers less attractive to shoppers looking for products at this price level.
GROCERY SHOPPING AND PRIVATE LABEL PRODUCTS
Dollar stores have upgraded their private label assortments to give shoppers unique products at a value. Ever-changing economic conditions have created growth opportunities for the value retailer and store brands overall. As a result, the continued development of private label assortments could be the key to dollar stores’ efforts to separate themselves from other retailers while also offering shoppers high-value products.
“One of the many ways Dollar General differentiates itself is our focus on value,” Dollar General’s Jackie Li asserts. “We want to make our customers happy by meeting and exceeding expectations. We made significant enhancements to our private brands in 2023, and we know how important these value offerings are for our customers. We believe these products will further differentiate Dollar General in the marketplace as we look to provide quality products that are customer-centric, on-trend, national-brand, or better, and stretch our shoppers’ dollars even further.”
With a continued expansion of private label assortments and a focus on dollar stores, industry experts contend that there’s more these retailers can do to expand their respective customer bases. Grocery is one area of potential growth.