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Price Matters: Dollar Stores Benefit from Cost-Conscious Consumers

Consumers are willing to abandon traditional venues to save a buck . / Credit: Penny pinching image via Shutterstock

Supermarkets and mass merchandisers are suffering from sales slippage as value-conscious shoppers  explore alternative avenues to rein in skyrocketing grocery bills. Their loss is profit for those price-point retailers known as dollar stores, a new survey shows. They're benefitting from a new wave of bottom-feeding consumers who are willing to abandon traditional shopping venues to save a buck.

While supermarkets are still the primary channel where consumers purchase groceries, they are facing challenges from other retail formats. Mass merchandisers such as Target and Walmart are still their largest competitive threat (73 percent of consumers purchase groceries there, down from 76 percent in 2011), according to a survey of more than 1,500 shoppers conducted by Perception Research Services, which specializes in shopper research.

But dollar stores are gaining momentum as the percentage of shoppers who purchase groceries there has increased from 32 percent last year to 35 percent in 2012.

The survey also revealed that shoppers target specific retailers for different needs. They shop supermarkets for selection and mass merchandisers for price. And price is an increasingly important factor in the equation.

Ever since the Great Recession of 2008, shoppers have been trying to reduce their grocery bills.  During 2012, more shoppers used sales/coupons (83 percent) and quantity/size control (70 percent) to save money than in 2011.  Most important, this year significantly more shoppers claimed to have switched brands to curb costs (61 percent versus 49 percent). And while this might not be surprising among older shoppers who may be having to make do with less, it is also apparent among 18- to 24-year-olds who are establishing shopping patterns for many years to come, the survey found. This could have broad implications for brand manufacturers.

"Our latest findings on grocery shopping indicate how very discerning today's shoppers are — about their venue preferences as well as brand choices," said Jonathan Asher, executive vice president at PRS. "Retailers must understand their competitive strengths and capitalize on them, while also making the necessary adjustments to their offerings to seize opportunities for a larger slice of the pie as shoppers are more open to new shopping possibilities than they have been since the 1950s with the advent of large, supermarket chains."

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.We're also on Facebook & Google+.

Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.