How 2020 Paved the Method for $5-and-Below Retail

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Popshelf, Dollar General’s new $5-and-under retail outlet, is brushing aside any notion that brick-and-mortar chains are on the way out. In fact, analysts Adweek spoke with say the store concept comes at the right moment in these uncertain economic times.

The first two Popshelf stores will open outside of Nashville. Tenn., this fall. Goodlettsville, Tenn.-based Dollar General plans to have approximately 30 Popshelf locations by the end of fiscal year 2021. A spokesperson declined to comment on additional markets. 

Focused on categories like décor, health, beauty, cleaning and entertaining, 95% of the items Popshelf carries will be priced at $5 or less with “a complement of extreme value items priced above $5.” Popshelf stores will be around 9,000 square feet, slightly larger than most dollar stores, but one-tenth the size of the average Walmart at 107,000 square feet.

This makes Popshelf a close retail parallel to Five Below, another value retailer that wants to help consumers “let go and have fun” with products priced mostly from $1 to $5. Those products exist in eight “worlds”: Tech, Create, Play, Candy, Room, Style, Party and New & Now. Founded in 2002, Five Below operates 950 stores in 38 states.

In its Q2 earnings announcement, Five Below president and CEO Joel Anderson noted a “challenging backdrop” that included Covid-related store closures earlier this year. The outlet has since reopened stores, added 63 new outlets and is still on track to open a total of 110 to 120 new locations in 2020.

Forrester analyst Sucharita Kodali said Five Below’s product assortment of “affordable luxuries” has helped it do well in a challenging retail environment, making Popshelf a smart move for Dollar General.

“Dollar General is one of the retailers doing well now. I applaud their willingness to embrace new concepts,” Kodali said. “Real estate costs must be very favorable for them for experimentation.”

Jessica Ching, senior principal at Gartner for Marketers, agrees that Popshelf’s timing is fortuitous.

Ching said the struggles of retailers like Party City and The Paper Store could also bode well for Popshelf. Gartner research has shown consumers remain willing to discover new brands in the pandemic—36% have bought something they didn’t usually buy or tried a new brand for the first time.

Value-based commerce is indeed one of the few bright spots in retail this year.

In August, Dollar General reported net sales were up 24% to $8.7 billion. (Comparatively, Amazon’s net sales were up 40%, while Walmart’s were up 9.5%.)

As an essential retailer, Dollar General remained open throughout the pandemic. The chain now operates 16,720 stores in 46 states. To put that into perspective, its U.S. footprint is larger than both McDonald’s, which has 14,428 restaurants in the U.S., and Starbucks, which reportedly boasts just over 15,000 U.S. locations.

Popshelf is the second new retail concept from Dollar General. In December 2019, the company announced DGX to provide “an affordable retail option” for millennial customers in “vibrant metropolitan city centers.” It now operates 15 DGX stores in 11 states.

Kodali said she suspects the DGX stores are doing well now, too, as they tend to be “in higher income areas, often in university towns.”

Popshelf’s target consumers are suburban women with household incomes of $50,000 to $125,000.

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