Dollar TreeDollar stores are luring a lot more consumers these days.

While it's no surprise these discount retailers gained popularity during the economic downturn, their rock-bottom prices aren't the only reason for their still growing appeal: Dollar store chains have undergone major makeovers in recent years, sprucing up their dingy digs and adding more compelling merchandise.

"At the start of the recession, they decided they didn't want to be recession-dependent retailers, but that they would become mainstream," Dave Marcotte, senior vice president of market research and retail consultancy Kantar Retail, tells DailyFinance.

The strategy appears to have paid off as the chains, which have long been patronized by the cash-strapped, have managed to capture more business from higher-income shoppers.

For example, Dollar General (DG), which just announced plans to open 625 stores this year, noted recently that its fastest growing customer segment is shoppers who earn more than $70,000 a year. And Dollar Tree (DLTR) was called out by Kantar Retail as one of the country's fast-growing retailers in a December report.

Here's why the dollar chains, including top players Dollar General and Family Dollar (FDO), have become some of the hottest places to shop.

Upgraded Merchandise

Once synonymous with generic goods of dubious quality, dollar stores have made a big push in the past few years to upgrade their product mix with the addition of well-known brands -- from Tide laundry detergent to Kellogg's cereals.

"The addition of national brands brings consistency to the merchandise mix and appeals to brand-conscious consumers," Deborah Weinswig, a retail analyst with Citi, tells DailyFinance.

They've also sprinkled their store shelves with items that have a "wow" factor and can spark an emotional purchase -- what the retail industry calls "treasure hunt" goods -- which has created "a sense of excitement in dollar stores," Weinswig says.

And in their selections of general merchandise, these chains have increasingly moved away from "really cheap knockoff stuff" towards better-quality clothing and home goods. They've also standardized their inventory so that shoppers can expect more consistent product offerings year round.

About two years ago, Family Dollar launched Family Chef, a proprietary line of housewares, including cookware and kitchen gadgets, that marked a major upgrade from its prior "very spotty" offerings, Marcotte says.

Meanwhile, Dollar General added in more national brands like Hanes to its apparel mix, he says.

Compelling Grocery, Drug Store Alternative

Also in recent years, the dollar chains improved their food and consumables offerings, which has boosted foot traffic in the stores, Weinswig says. "They've added coolers, quick prep, and ready-to-eat food."

The dollar chains are also giving drugstores a run for their money by carrying much of the same health and beauty care products as a Walgreens (WAG) or a CVS (CVS), for example -- but at lower prices, Marcotte says. Family Dollar, for example, is emphasizing those deal with in-store signs that urge shoppers to compare its prices to drugstore prices, he says.

The upgrades are poised to "have the greatest impact on the food and drug retailers, as the dollar stores' convenience and competitive pricing gives consumers another option for making convenient purchases," according to Weinswig's Citi report, "Dollar Stores Well Positioned for Success."

Dollar chains have also given their stores facelifts.

"They've made the stores much easier to shop and simpler to navigate," Marcotte says. Today, many of them "are clean, attractive and well lit."

Convenience Fits with New Shopping Patterns

More consumers are forgoing massive shopping trips where they load up on household goods that will last them a month -- a shift that has been a boon for the dollar chains, Peter J. Keith, senior research analyst for hardline retail and consumer products for Piper Jaffray, tells DailyFinance.

"In terms of the dollar store popularity, I would say the greatest reason is convenience," he says. "Consumers are now preferring to make smaller purchases on a more frequent, as needed basis. This type of shopping lends itself well to dollar stores where you can park right by the front door and get in and out in five minutes. Conversely, a trip to Walmart (WMT) might take 30 minutes with the large parking lot and large store to navigate."

Meanwhile, some dollar chains are becoming even more bargain-conscious in their pricing due to the nation's lingering economic malaise.

Dollar General, for one, has expanded its offerings of $1 priced items in response to "the high unemployment levels among customers without a high school diploma," says Weinswig's report.









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rory_darbian

It makes me laugh that Dollar General and Family Dollar are considered dollar stores. Forgive me for thinking that in a dollar store everything should cost a dollar not a dollar plus a little extra or as I've heard people say about Dollar General "generally a dollar". I wont shop at these fake dollar stores because there is still just as much navigating and price checking as there is at Walmart. If not everything is a dollar, don't claim it is.

December 08 2013 at 3:31 PM Report abuse rate up rate down Reply
aslkell

Dollar General has a $5 off $25 coupon that comes on my receipt sometimes. If I go the specified day and buy cleaning products or other necessities, I think it really saves me money.

November 29 2012 at 8:25 PM Report abuse rate up rate down Reply
Wilbert Dupre

I ENJOY SHOPPING THE DOLLAR STORES,BECAUSE I CAN FIND THE NAME BRAND PRODUCTS THERE CHEAPER,I TRY TO SHOP ONCE A MONTH.I,M ON A FIXED INCOME AND DOLLAR STORES HELP ME SAVE MONEY,I BUY A LOT OF FOOD ITEMS ,SUCH AS COFFEE,SUGAR,AND CANNED GOODS.HAVE BEEN SHOPPING THERE LONG BEFORE THINGS STARTED GETTING TIGHT,THANK YOU DOLLAR STORES FOR HELPING THE WORKING PEOPLE TO BE ABLE TO MAKE THAT DOLLAR GO FARTHER THEN AT OTHER STORES,JUDY

June 14 2012 at 10:28 PM Report abuse rate up rate down Reply
Tom Vosicky

Dollar Stores are my favorite subject because the company I work for builds them for people every week. I think that the kick in the butt our economy is taking has created a new and permanent retail foothold with the Dollar Stores. Much like in the great depression that generation shopped and conducted themselves differently after that - to a lesser extent, however still noticeable our generation is consolidating wealth and becoming more minimalist in nature than before. Check out these reports that talk about the rise of the dollar store (on youtube) - http://youtu.be/PJAbvj7g8-4 and this one too http://youtu.be/X3kUgcWZdhk. While you are looking at dollar stores have you ever considered opening up your own? I paid more for a corvette than what a dollar store costs to start and it makes money every year and my corvette just looses me money! Check out our channel on Youtube to see what it takes to start your own dollar store: www.youtube.com/dollarstoreservices - I am the Creative Director there so I make a lot of the videos of these people, all great stories.

March 25 2012 at 9:12 PM Report abuse rate up rate down Reply
1 reply to Tom Vosicky's comment
Tom Vosicky

Forgot to mention that if you want to open a dollar store you should definitely check out: http://www.dollarstoreservices.com :) I know I'm plugging the company I work for, but it is the best company to go through if you are wanting a 100% turn-key business that you walk into and run and own from the first day.

March 25 2012 at 11:59 PM Report abuse rate up rate down Reply
claudette

once in a while i shop at dollar general because of their prices and convenience. i bought goody powder ( no i'm not a lady hick!!!!!) i payed $2.50 for a box containing 16 powders.i do believe i saved money. (over $4.00 for 24 at the grocery store) correct me if i'm wrong.

January 10 2012 at 2:32 PM Report abuse rate up rate down Reply
piknplundr

I have been trying real hard to buy Made in America products to try and help create more jobs. Lately, I have noticed at our Family Dollar and Dollar General that you can find more items made in America. There was a time that it was close to impossible to find made in America at either of the stores. My favorite at both places is a brand of candles made in America. They smell so good and are only $3 for a good sized candle. I shop at both stores at least twice a month.

January 10 2012 at 1:02 PM Report abuse +2 rate up rate down Reply
1 reply to piknplundr's comment
packard54

Good observation, piknplunder. I just read about a store near Dayton, OH that carries about 90% American Made products and clearly marks them all. What little imported goods they sell are off by themselves and NOT marked as American Made. Real easy to shop this way. I just hope the EPA or some other government agency doesn't come along and put a "monkey wrench" in the gears by closing down these manufacturers. They have a habit of doing things like that.

January 10 2012 at 2:22 PM Report abuse +2 rate up rate down Reply
Davie2743

When you visit these store make sure your are not a day late or a dollar short.

January 10 2012 at 12:58 PM Report abuse +3 rate up rate down Reply
phpoling

Excellent prices that you can save a lot of money when you shop at Dollar Tree Stores anywhere.

January 10 2012 at 12:39 PM Report abuse +3 rate up rate down Reply
jbjg24m

we buy lots of our cleaning supplies there, also some grocery items are a lot cheaper there also, why pay more when u can get it for less ?

January 10 2012 at 12:01 PM Report abuse +7 rate up rate down Reply
bann585

When George Bush was president, the media published columns about him that bordered on the obscene. One woman reporter was so vitrolic, I assumed he stood her up on a date. I was one day away from a national election and I was goiing to vote democratic until the nominee appeared on TV. He was so arrogant, sneering, and down right mean, I changed my vote. The media is biased. Wasserman-Schultz has maniac eyes. I'm sorry dyed in the wool democrats, too many mistakes, maybe not mistakes, just a God complex. Oh, I'm sorry, can't mention God.

January 10 2012 at 11:49 AM Report abuse +6 rate up rate down Reply
1 reply to bann585's comment
savemycountry911

Never trust a Democrat.

January 10 2012 at 8:27 PM Report abuse +1 rate up rate down Reply