Variety Stores in the US

2020 IMPACT

Variety stores capitalise on shift in consumer spending

Variety stores saw strong growth in 2020, in large part due to the enormous impact of COVID-19 on consumer spending, but also due to the substance of their value proposition. Crucially, when many other retailers were required to shutter stores during the strictest period of lockdowns in the US in March and April, many variety stores were deemed essential because of their consumables business, and thus able to stay open.

Rapid store expansion and online services driving growth strategies

Store expansion has been at the heart of variety store growth strategies for some time. Given their reliance on foot traffic and notoriously low margins, retailers in the channel have, for the most part, pursued a larger physical footprint at the expense of e-commerce investments.

Dollar General continues push into grocery

Having developed its DG Fresh initiative to expand the assortment of fresh and frozen goods on offer at its stores, Dollar General is now reaping the rewards of its biggest sales driver. Capturing large numbers of price-sensitive shoppers during the pandemic gave Dollar General the opportunity to enhance its grocery offering, serving those who might not have easy access to grocery stores.

RECOVERY AND OPPORTUNITIES

Variety stores well positioned to weather recession

The success of variety stores in 2020 shows the channel’s resilience in tough economic conditions. The shift in spending towards lower-priced goods during the pandemic is likely to be cemented if a recession takes hold over the forecast period, with few channels better positioned to benefit.

Expanding the customer base key to growth

Traditionally serving cost-conscious consumers, variety stores will look to not only bolster their value proposition with their existing consumer base but will likely look to pull in new customers from higher-priced retailers. Major players such as Dollar General have mounted a significant rebranding effort in recent years to capture new demographics that may have previously avoided or dismissed variety stores as an option.

Variety stores must beware over-expansion

Catering to mainly in-person shoppers and offering low-margin products, US variety stores do not have the same incentives to build out an online presence as many other store-based channels. Dollar General, for example, claims to be within short driving distance of most US consumers, filling in the gaps where the reach of Amazon and even Walmart may not be sufficient.