Dollar Tree is opening nearly half of its new stores in affluent neighborhoods
Max Levchin, CEO of Affirm, provides insight into consumer spending habits based on Affirms data in ‘The Claman Countdown.’
Discount seller The Dollar Tree is opening new stores in affluent areas as it seeks to attract affluent customers who spend more in-store with each trip, a new report finds.
Analysis by Bloomberg News found that 49% of new Dollar Tree stores opened in the past six years were located in affluent parts of metro areas nationwide, up from just 41% six years earlier.
The share of new stores in ZIP codes with the highest income relative to the metro area increased to 19% over the past six years, up from 16% six years ago. At the other end of the spectrum, the share open in ZIP codes with the lowest incomes fell to 14% from 20% in comparable periods, Bloomberg found.
Dollar stores historically they have seen business growth during recessions as more consumers seek to save, but as wealthier households drive more consumer spending, this change comes as a way to attract those consumers more often.
WHY BUYERS MAKE SIX FIGURES MAKE THE DOLLAR TREE
Dollar Tree is opening a growing share of new stores in affluent neighborhoods. (Spencer Platt/Getty Images)
Dollar Tree says that last quarter, 60% of new Dollar Tree customers made at least six figures. About 30% were middle-income households earning between $60,000 and $100,000, while the rest were low-income households earning less than $60,000.
While these high net worth customers visit Dollar Tree less than their lower-income peers, the company said they spend an average of $1 more per visit and if they could make one more visit a year, it would boost annual sales by $1 billion.
INFLATION SLOWED DOWN IN JANUARY BUT REMAINED WELL ABOVE THE FED’S TARGET.
| A ticker | Security | Finally | Change | change % |
|---|---|---|---|---|
| DLTR | Share price of DOLLAR TREE INC. | 126.06 | -2.37 |
-1.85% |
Dollar Tree CEO Michael Creedon it said late last year that the retailer serves “a growing range of consumers, from focused households to middle- and upper-income consumers who are making more deliberate decisions about how and where they spend.”
He added that the data “shows that Dollar Tree is not just for hard times or for those with limited resources.”
THE DOLLAR GENERAL IS SEEING AN INCREASE IN HIGHER BUYERS WHO WANT TO MAKE THEIR DOLLARS
Dollar Tree is looking to attract high-income customers. (Scott Olson/Getty Images)
“Although the average household spend on our high-income customers is low, even when we consider the high income, average basket size and high spending power, this is a simple exercise of trip frequency,” said Creedon.
He added that “because many of our high-income customers are just beginning their relationship with Dollar Tree, their purchases have significant room to grow.”
Consumers’ purchasing choices have also contributed to the change, as more families trade up to balance higher costs due to inflation.
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The high cost of essentials such as groceries and household items has forced more and more to shop at stores known for deep discount or everyday low-price models, such as Dollar Tree, Dollar General, Walmart and Aldi.
