The Value Channel

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The Value Channel

By Steve Frenda - 09/01/2019

As I studied the value channel across a few prominent retailers, I couldn’t help but consider the impact this rapidly growing segment is having on major manufacturers and traditional retailers – and that’s not to mention the impact private label, emerging brands and e-commerce are having on them as well. In the past, value stores were simply located in downscale neighborhoods and very rural locations, and they had their niche. Now with stores appearing in mid- to upscale suburban communities, their impact is even more dramatic. Here, I’m sharing some findings at Aldi, Dollar General and Dollar Tree.

  • Although Aldi stores have a relatively small footprint, check out not only the impressive wine section but also the efforts to cross merchandise fresh fruit and cheeses. Additionally, some of those prices will catch your attention. I noted that some of the varietals are quite popular with the Millennials and Gen Z population these days.
  • As I walked through Aldi – a clean, well-appointed and efficient store – I was struck by one thing: the corporate pride they take in their operation, whether it is Aldi’s accomplishment of being a recognized value leader (as seen here), its $13.50 per hour starting wage for store associates, or its spirit of giving back to the community in food donations and cash. Also, note in the partial sign in this picture that they are now touting “Same Day Delivery.”
  • I’d like to reiterate that this is not your mother’s Aldi. Something that struck me on my store tours is what appears to be a greater number of upscale shoppers than I have ever observed before. In my circles, rather than an embarrassment (as shopping in these value stores was in the not-too-distant past), things have shifted 180 degrees to being a badge of honor in cocktail conversations.
  • Dollar Tree's $1 price point is achieved in partnership with Hershey (shown here), Procter & Gamble in paper goods, Crystal Geyser in bottled water and PepsiCo in carbonated soft drinks and snacks. “More $1 Power” – great value in many departments.
  • This photograph taken at Dollar Tree says it all. It’s a retailer that strives to sell everything in the store for $1. There is a lot of work that needs to be done with brands to make the vision come to life. In this case, it’s Hallmark.
  • Dollar Tree does promote a bit of treasure hunting in the front of its stores. In this case, it’s an attractive display of glassware and other gift items for $1. In the background, there’s a nice display of jewelry, hair accessories and scarves. All of this comes in a clean store that is pleasant to shop.
  • As you would expect in a general store, there’s a wide variety of categories available, from Dollar General’s heritage of soft goods to household, hardware, HBC, toys, greeting cards, groceries and more. All at incredibly low prices. Check out the “DG$1Deals” as shown here. Consider the agreements with major manufacturers to enable prices of $1 on these items.
  • Dollar General has been very innovative and shopper-oriented, exemplified by the fact that it was one of the first retailers without a loyalty card to introduce digital coupons. The shopper’s ID is his or her phone number. Consider the strength of this proposition in that Dollar General shoppers’ cell phone usage indexes at roughly two times the general population. The reason: their customers often have no home computers or Wi-Fi.
  • In a time when the number of retail stores is contracting, there is an amazing success story that has emerged. Dollar General, truly a general store, is now at 15,000 stores and growing. Imagine that 80 years ago in Kentucky, when the first store opened, it was largely a retailer of surplus and discontinued soft goods. Today, the chain is a major success in 44 states. As I travel through the Midwest and Southeast in my RV on state highways, I’m struck there is a Dollar General store roughly every 10 miles – always with cars parked in front. 

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