Retail Marketing

The dollar doesn’t quite buy what it used to. What’s a discount brand to do?

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By Jenn Szekely, President

May 29, 2024 | 5 min read

As part of The Drum’s Retail focus, Coley Porter Bell’s Jenn Szekely explores how the humble discount/dollar store can adapt to unprecedented pressure.

An array of discounts

The battle for the US dollar is getting fiercer. Behemoths such as Target and Amazon dominate the market through their scale and ability to leverage suppliers. At the other end of the market, discount retailers are trying to compete through geography and local connections.

But many are struggling – while Dollar General is faring better than some, others have seen their sales stutter. Dollar Tree, owner of Family Dollar, opened over 400 new stores in 2022, seeing a 9% increase in sales to $7.72bn. But the brand is now expected to close 600 stores this year. And 99 Cents Only could be out of business entirely, blaming the pandemic, inflation, and shifting consumer demand.

There are clear branding lessons this sector needs to adopt to stay agile and avoid following a similar fate to already shuttered competitors. Retailers in this market need to up their branding game to better deliver what value-oriented customers want and bolster their business performance in the process.

Putting the dollar back into dollar store

Discount retailers need distinctive and recognizable branding, with visible signage and clear elements that show exactly what they’re about – a dollar store providing shoppers with value products. After all, if they’re going to be a key feature across rural communities and become a familiar sight, stores need to have an image that draws customers in, something Dollar General has done well.

However, many discount retailers have become confused about their value proposition, which is reflected in their branding and part of the reason for their decline. For instance, Dollar Tree raised prices for many of its products from a dollar up to $1.50 in line with inflationary pressure and also introduced products costing up to $7 – a far cry from its previous name, “Only $1.00.”

While parts of its offer had evolved in response to the economy, Dollar Tree slowly lost the essence of what once made it so popular, and other discount retailers were there to take its place. Not everything needs to be a dollar, but these brands should think strategically about how they can maintain a rotating dollar mix and curate diverse offerings based on what is available to draw consumers in.

Discount retailers are popular because of their low-cost offers, so when shoppers enter a store, retailers need to make it easy for them to find the best offers. Where are the $1 products that live up to the dollar store name? Which promotions should customers pay attention to this week? This should be a straightforward process – when I’m visiting a discount store, I want to know where the discounts are. Even brands like Target have a consistent space where they display seasonal and promotional price-conscious goods when you first walk into the store.

The power of own-label brands

Most retailers are getting in on the private or own-label action, which makes sense in the current climate given they are known as a lower-cost alternative to branded products. Own-labels have evolved beyond the cheap, poor-quality products consumers once perceived them as and are now seen as credible products that outperform national brands.

Own-label ranges are a win-win for those shopping at discount retailers, as they offer a lower-cost alternative at an already low-cost store. Over the last five years, Dollar General has focused on upgrading its own-label packaging and launching new owned brands. Its own-label ranges, such as Good & Smart, Gentle Steps, and premium pet food brand Nature’s Menu, rival the larger retailers, focusing on introducing innovative products that are the same or better quality than national brands.

To stay competitive, discount stores need to up their game on their own-label, much like Dollar General has. By increasing their own-label offerings and creating distinctive, standout branding for each range, retailers can build customer loyalty and drive increased levels of demand. Let’s not forget the higher profit margins, as it is often cheaper to make your own products than to buy premade products. Even Target is trying to get in on the action by introducing its Dealworthy brand, which Business Insider described as a “dollar-store-style budget brand.”

It’s a treacherous time to be a discount retailer in the US. Despite the significant need for these types of stores as a way to help people save money, we have learned from the demise of the 99 Cents Store that this doesn’t mean it’s plain sailing. These retailers need to remember why they became so popular in the first place and be distinct with their image as the go-to place to get the best discounts.

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