Dollar, Discount Stores Reign Supreme This Holiday Shopping Season

Discount and dollar stores are showing signs of strength heading into the busiest part of the holiday season, according to a new analysis of foot traffic to the largest US off-price chains.

All showed foot traffic gains in the second half of the year, with October growth of 20.9%, 16.1%, 26.7%, and 54.1% for Family Dollar, Dollar Tree, Dollar General, and Five Below, respectively, according to Placer.ai’s Bracha Arnold.  And digging into year-over-year trends tells a similar story, with foot traffic to Family Dollar and Five Below remaining above 2021 levels every month this year and registering visit growth of 1.7% and 2.3%, respectively, in October 2022.

“Dollar General saw YoY foot traffic increases almost every month except October, when visits fell just 3.1% relative to October 2021,” Arnold sats. “Meanwhile, Dollar Tree saw slight YoY dips, but this is in comparison to last year’s strong performance, and not a reflection of reduced consumer demand.”

Arnold notes that most discount and dollar stores are pushing ahead with strategies for long-term growth as well.

“As inflation continues to strain budgets, higher-income customers are choosing lower-priced shopping options – and discount stores are expanding their retail footprint and offering a more diverse mix of products to keep new customers coming back,” Arnold says. “Dollar Tree, Dollar General, and Five Below have all been experimenting with higher-priced retail concepts to expand their product selection and consumer base. Dollar Tree, Dollar General, and Family Dollar have also begun testing fresh foods, including produce, in several of their stores. The decision to diversify their offerings moves these brands closer to ‘one-stop-shop status and is likely to pay off as inflation pushes value-oriented consumers to seek out lower-cost options.”

In addition to enticing consumers, discount and dollar stores have also emerged as investor favorites since the onset of the pandemic. While discount and dollar brands have typically operated their locations on a double net basis, with roof and structural responsibilities held by the landlord, they have more recently shifted new stores to a triple net lease model, Landan Dory, VP of Avison Young’s US Capital Markets Net Lease Group, said last year.

“Most of the new-build Dollar Generals are being rolled out on 15 year triple net leases with flat rent for the first 15 years of the lease and 5% rental increases baked into the 5 year options,” he said. “Dollar Tree is erecting new build stores usually on a 10-year double or triple net lease with 5% rental increases every five years.”