As Inflation-Weary Shoppers Look for Bargains, Here’s How Dollar and Convenience Stores Can Seize Their Moment
We’ve seen this one before: As prices rise and wallets shrink, consumers are changing their habits. However, not every industry is losing out. Shoppers are still spending, but they increasingly need discounts and convenience.
For dollar stores and convenience stores, this is their moment to shine. Here’s what they're up against and how they can keep bargain-hunting customers coming back for more.
Evaluating the SKU Assortment
To attract the modern shopper, dollar and convenience stores should expand their variety of offerings, as well as start thinking critically about where those offerings come from.
In stark contrast to the famous roller dog, modern convenience stores are increasingly offering fresh foods, often prepared onsite, to appeal to health-conscious consumers. Dollar stores should make an equal effort to appeal to modern shoppers’ elevated tastes by offering discounted versions of their favorite products and other similar bargains.
And while today’s consumers are looking to save money, they're increasingly conscious about where products are sourced from and how they're produced. While it can be challenging for dollar and convenience stores to source ethical products while staying within bargain price points, this level of responsibility and transparency can pay real dividends to modern shoppers.
Encouraging Customer Loyalty
It isn’t enough for dollar and convenience store owners to attract new bargain-hunting shoppers to their stores; they need to find ways to keep them coming back long after the economy has recovered.
To start, these stores should do everything they can to avoid stockouts. If shoppers are coming for convenience, not having what they want creates an experience that’s likely more frustrating than shopping at a big-box retailer with a wider selection within the same product categories. But when you have 16,000 stores, that’s easier said than done. Supply chain leaders are wisely digitizing their operations and making investments to stay in front of supply and demand shocks and other inventory disruptions.
Perhaps an easier way to build that loyalty is through a loyalty program — a method that not nearly enough stores today are yet embracing. Programs like Dollar Tree’s Value Seekers Club have proved to be a win-win: customers get even better prices, while retailers get valuable information on their customers every time they make a purchase to better improve the experience, including what made them come into the store, what products they purchased, how much did they spent, etc. While this is a widely accepted best practice, during my tenure with a leading market research firm and other data providers, I was frequently surprised by how few retailers truly mine their loyalty data properly to build relationships with customers.
Once these stores have captured customer loyalty, they can work to better counteract inflation themselves. As prices rise across supply chains, it’s going to be increasingly difficult for stores to realize a profit from a $1 item. That’s why Five Below is launching hundreds of stores called Five Beyond in an attempt to retain its loyal customer base without misleading them now that prices have ballooned above $5. If done well, loyal customers will view dollar-plus discount stores as an enticing expansion of their favorite brand, rather than a dupe.
Navigating Labor and Loss Challenges
While dollar and convenience stores have unique growth opportunities, they must still contend with the two challenges all retailers face today: labor and theft.
The labor market is still upside down, with millions of working-age people removing themselves from the labor pool. This impacts many convenience stores that simply don't have the staff to operate properly. In a highly competitive environment, operational efficiency is paramount — and technology can, yet again, make a difference.
Take, for example, how Dollar Tree Stores used supply chain visibility to get real-time status updates and highly accurate ETAs that empowered managers to plan labor more efficiently. “Truck Day is the worst day in a store,” shared Chris Bauman, director of outbound transportation. “Knowing when that truck is coming, being able to plan resources the best they can, and plan that labor in a limited environment is very important for our stores.”
In addition to labor challenges, because convenience and dollar stores are often located near large roads or interstates, they're vulnerable to theft. Advanced video technology can help solve both of these challenges. Many stores are experimenting with cameras trained on certain areas of the store, especially high-margin and high-velocity product categories. Cameras can not only prevent theft, but they can also show when an item is about to go out of stock, facilitating quicker restocks and satisfied customers.
Even better, these cameras can be monitored remotely — allowing just one person to monitor an entire store or even multiple stores at once. This relieves the strain on understaffed management as well as on overworked in-store associates who are now freed from monitoring the shelves and can turn their efforts toward customer service.
From loyalty programs to anti-theft technologies, there are a number of changes shop owners should make to optimize their businesses. Amidst economic uncertainty, however, it can feel risky to take the leap.
This is where “co-opetition” is garnering attention. It’s becoming more common for four or five retailers to informally connect and share information and strategies that benefit them all. At the height of COVID’s shipping crisis, we even saw competitors agreeing to share space on container ships coming from China. Rising tides lift all boats, indeed.
Businesses are also using co-opetition to evaluate new suppliers and technologies without spending money and taking on risks all by themselves. As retail continues to embrace automation, we should also increasingly see these groups agreeing to adopt the same technology simultaneously, thereby giving the technology providers greater capital to invest, hire and improve their product. By working together, everyone benefits.
Bargains and Beyond
Recession and inflation are bad news for nearly every type of business. But for convenience and dollar stores, opportunity is knocking. If business owners can swing open their doors to reveal enticing products, enhanced experiences, and trusted technologies, customers will come flooding in — and they’ll keep coming back.
Related story: 4 Ways Retailers Can Succeed in 2023
At FourKites, Mark engages with retailers’ c-level leaders and their teams to understand and address industry specific workflows and use cases. He has more than 20 years of experience in the retail industry and has worked with most large retailers globally. Before joining Zebra, Mark held leadership roles at Nielsen and General Mills and owned his own retail technology and analytics consulting firm.