How Could Inflation Impact Dollar Store Prices?
As inflation continues, consumers’ last refuge for low prices could vanish — or at least not deliver quite as much savings as they have in the past. Many dollar stores, known for delivering name-brand items at bargain prices to shoppers (often in lower-income areas) have been forced to raise their prices given current rates of inflation.
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Of course, some dollar stores, like Dollar General, have always offered items at more than a dollar, but at prices that were still, for the most part, lower than grocery stores and even big box retailers like Target. But now even Dollar Tree, known for its “everything for a dollar” business model, has hiked prices across the board to $1.25.
Dollar General is experimenting with a new, higher priced concept called Popshelf, placing 1,000 stores in middle-income regions which sell slightly higher priced goods. Household income in areas that host a Popshelf could be as high as $125,000. Five Below is another bargain store that has raised prices, although the chain did so for the first time in 2019, prior to the pandemic. The store, known (as the name implies) for selling items at $5 and under, started offering certain items for as much as $10. These items — primarily name brand toys, games and electronics — sell in their own sections of the store, dubbed “Ten Below Gift Shop” and “Ten Below Tech,” respectively.
Although most of Five Below’s offerings, which includes candy and beverages but few other foods, still sell for $5 or less, The Business of Business found that the average cost of a Five Below item in August 2021 was $4.69, about 73 cents higher than the average price (pre-pandemic) in August 2019.
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Nonetheless, it’s grocery prices at dollar and discount stores that have been hit the hardest by inflation. The prices for groceries and household goods increased by 11.5% and 15.3%, respectively, in February, The Street reports. That’s higher than the national average for inflation that month, which was at 7.9% based on Bureau of Labor Statistics figures.
Between 2020 and 2021, the price of groceries at dollar stores increased by 22.5%. Costs continued to rise from 2021 to 2022, going up another 14.3%, according to The Street. Meanwhile, online grocery store prices have risen by 12.4% since 2020.
Dollar stores still remain one of the more affordable options in terms of buying certain groceries and household goods, however, and this may be why consumers continue shopping there in spite of rising prices. Foot traffic has grown at Family Dollar by more than 20% since 2019. Similarly, Dollar General has experienced a 28.2% rise in traffic.
Dollar Tree traffic grew by 13.7% in spite of some outspoken shoppers protesting the company’s 25 cent price hike on social media. In fact, 91% of Dollar Tree shoppers said they would continue to shop at Dollar Tree with the same — or increased — frequency, since the price hike enables the store to deliver even more items at tremendous value, according to an earlier report by GOBankingRates.
Five Below also continues to do well, adding 269 stores across the U.S. since the start of 2020.
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As inflation continues to surge, dollar stores will remain one tool shoppers can use to stay within their grocery budgets and feed their families. A dollar may not stretch as far as it used to, but prices on most items remain below what you’d spend for the same goods at traditional grocery stores.
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