“If you can’t beat them, join them” is becoming the mindset for many Americans right now, as even people with higher incomes are increasingly shopping at dollar stores amid high prices and an uncertain economy.
Stores like Dollar General and Walmart brought in more customers than usual in December, according to EY-Parthenon’s latest U.S. Consumer Sentiment Survey released this month, indicating that more people are looking for ways to save money, even if it means shopping at stores they haven’t visited before.
Consumers earning more than $100,000 annually have been turning to dollar stores for discretionary purchases such as home decor, beauty and personal care items, and snacks over the past several months, according to the survey. At the same time, when those same shoppers visit larger discount retailers, their spending is more focused on essentials like produce and pantry staples.
“We’re really seeing a mosaic or…an impressionist painting of the economy right now, because it is so many moving parts and so much confusing data out there,” Will Auchincloss, EY-Parthenon’s Americas retail sector leader, told Retail Dive regarding the consumer behavior trends. “I think the big headline is…all consumer segments have felt the impacts of inflation and rising costs across many categories.”
Meanwhile, other experts note that this behavior is not entirely new. In 2021, Dollar Tree, which still owned the Family Dollar brand at the time, moved beyond its traditional $1 pricing and introduced a multi-price strategy, which not only helped the company protect profits but also drew in higher-income customers who were feeling the pinch of rising costs. According to a 2023 Rutgers Business Review article, the shift allowed Dollar Tree to appeal to a broader range of shoppers while maintaining its low-cost appeal.
Higher-income households often split spending, using discount stores for extras and traditional retailers for essentials, according to a recent survey (Getty Images)
During a May 2023 earnings call, then-Dollar Tree CEO Rick Dreiling said households earning around $80,000 were increasingly “trading down” — choosing Dollar Tree over more expensive retailers — and the company was beginning to focus on attracting this group specifically, Retail Drive reports. Dreiling cited that the economic climate, including inflation and rising costs, was pushing more affluent consumers toward value-oriented shopping.
Years after its implementation, the strategy continues to pay off, with higher-income households representing a growing share of Dollar Tree’s shoppers.
“We grew households across all income cohorts,” current Dollar Tree CEO Mike Creedon told analysts during an earnings call this month, Retail Dive reports. “The higher income does skew higher multi-price, no doubt about it.”
If the conflict in Iran pushes gas prices higher, people might change how they shop because they can’t easily cut back on gas costs, experts say. Unlike other expenses, fuel costs are difficult for consumers to cut back on, which could force people to adjust their spending in other areas, including groceries and household goods.
For discount retailers like Dollar Tree, this environment presents an opportunity.
“So the price impacts everyone, but for us, Dollar Tree is really that key tool that helps them manage their budgets and deal with these, with these higher prices,” Creedon told analysts, the outlet reports.
