Family Dollar’s parent company Dollar Tree recently announced plans to dramatically rightsize the discount chain’s store fleet, with 600 stores slated for closure in 2024 and more to follow in upcoming years for a total of almost 1000 closures. We dove into the location intelligence for Family Dollar and three other leading value-forward retailers to understand which chain stands to benefit most from Family Dollar’s contraction.
Discount & Dollar Store Growth Bypassed Family Dollar
Dollar Tree’s plans to close almost 1000 Family Dollar stores did not surprise retail analysts. Discount & Dollar Stores have been on the rise in recent years, driven in part by significant expansions – visits to the industry up 25.4% in Q1 2023 and up 55.8% in Q4 2023 relative to pre-pandemic Q1 2019. But this growth seems to have bypassed Family Dollar. Q1 2023 visits to the brand were up just 0.8% and traffic during the critical holiday-driven Q4 2023 was up just 9.8% since Q1 2019.
Meanwhile, the eponymous banner of Family Dollar’s parent company Dollar Tree outperformed the wider industry during the same period, with a 28.4% increase in Q1 2023 visits and a 72.1% increase in Q4 2023 visits relative to a Q1 2019 baseline.
Competition for the Visitor Base of Shuttered Family Dollars
The Discount & Dollar Store space includes major players like Dollar General and the Dollar Tree banner that can fill the voids left by shuttering Family Dollar Venues. Walmart also may step into some of the newly created gaps. Analyzing the demographic and psychographic composition of the trade areas of these four chains – Family Dollar, Dollar General, Dollar Tree, and Walmart – may reveal the chain(s) best positioned to cater to Family Dollar’s current visitor base.
Family Dollar and Dollar General Share Hourly Visitation Patterns
Most people have set daily shopping habits, and chains will likely have more success vying for Family Dollar’s visitor base if they can accommodate the current visitation patterns of Family Dollar shoppers.
Family Dollar and Dollar General respectively receive 37.0% and 37.9% of their daily visits between the hours of 5:00 PM and 8:59 PM. Meanwhile, only 31.2% of Dollar Tree’s visitors and 34.3% of Walmart visitors visited those chains in the late afternoon and evening. The similarities between Dollar General and Family Dollar’s visitation patterns may mean that Dollar General’s staffing and opening schedule is suited to handle the influx of former Family Dollar visitors without making these visitors modify their current shopping behavior.
Family Dollar Serves a Distinct Demographic Base
Analyzing the four chains by trade area median household income (HHI) also shows that Family Dollar is closer to Dollar General than to Walmart or Dollar Tree – but the data also reveals that Family Dollar serves a distinct demographic base. The chain has a potential market median HHI of $62.1K and a captured market median HHI of $48.3K – in both cases, the lowest trade area median HHI of the four chains analyzed.
Potential market analysis weighs the Census Block Groups (CBG) making up a trade area according to the number of residents in each CBG. The low median HHI in Family Dollar’s potential market means that the chain’s venues tend to be located in lower-income areas compared to the other chains’ store fleets.
Captured market median HHI reflects the median HHI in the CBGs making up a trade area weighted according to the number of visits to the chain from each CBG. And comparing the four chains indicates that the gap between Family Dollar and the other three chains is even larger when looking at the captured market median HHI, with Family Dollar serving the lowest income households within its potential market.
Still, Dollar General’s trade area median HHI is closest to that of Family Dollar – although Family Dollar’s trade area median HHI is still significantly lower than that of Dollar General – which could mean that Dollar General will be most attractive to Family Dollar’s former visitors.
But looking at other metrics suggests differences in household composition between Family Dollar and Dollar General. Although the potential market share of households with children is similar for the two chains, Family Dollar’s captured market share is higher while Dollar General’s captured market share of households with children is lower.
Family Dollar’s popularity among lower-income households with children may explain why the chain has been struggling in recent years, as this demographic has been particularly hard-hit by the recent economic headwinds. And this distinct demographic base may also mean that Dollar General might want to make some merchandising, pricing, or marketing adjustments to best serve Family Dollar’s former visitors.
Psychographic Similarities between Family Dollar and Other Discounters’ Visitor Base
Although the demographic composition of Family Dollar’s trade areas sets the chain’s visitor base apart, diving into the psychographic segmentation of the chain’s captured and potential market highlights similarities with other value-forward retailers.
All four chains analyzed seem particularly popular with rural audiences – specifically with the Rural Average Income and Rural Low Income segments as defined by the Spatial.ai: PersonaLive dataset. (Dollar General and Walmart also see a disproportionate number of visits from the Rural High Income segment within their potential markets.) So some of Family Dollar’s rural shoppers may already be visiting Walmart or Discount & Dollar Stores – and these other retailers may choose to open in areas where Family Dollar is closing and where no other discounter currently operates.
The massive rightsizing of Family Dollar’s store fleet creates major opportunities for other value-driven retailers to expand their reach. Who will end up benefiting most from these shifts?
Check in with placer.ai to find out.
This blog includes data from Placer.ai Data Version 2.0, which implements improvements to our extrapolation capabilities, adds short visit monitoring, and enhances visit detection.
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