Sticking with the Trade-Down

It looks like a lot of the people who traded down to the dollar store channel are sticking with it, even if things are improving. Dollar General, for example had same-store sales that were up 7.4% in the most recent quarter.

Rick Dreiling, chairman and CEO of Dollar General Corp., told an investor conference last week that upper-income shopper are still turning up at the stores, and promise to stick around.
"For the second year in a row," he said, "95% of our trade-down customers are saying that, regardless of what happens to the economy, they're going to continue to shop with us."

Growth for the past several years has been impressive:

But can it continue? The companies seem to think so, and are adding lots of stores.

The long-term outlook for dollar stores could dim as the economy recovers but the chains are pressing ahead with plans to add hundreds of stores to the thousands that they already have.

To hold on to higher-income customers, many of the stores have stepped up their game in terms of what's on the shelf and how it's displayed. There's a new focus on nationally known brands and frequently purchased items like snack foods and cleaning supplies. 

I wonder, though, if they can continue to offer huge savings if they are selling national brands. And if they don't, will they alienate their core customers (and give someone else the opportunity to steal those customers away)?