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How might inflation affect dollar store prices?

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As inflation continues, consumers’ last refuge for low prices may disappear – or at least not generate as much savings as in the past. Many dollar stores, known for offering brand name items at bargain prices to shoppers (often in low-income areas) have been forced to raise their prices given current inflation rates.

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Of course, some dollar stores, like Dollar General, have always carried items over a dollar, but at prices that were still, for the most part, lower than grocery stores and even big-box retailers like Target. But now even Dollar Tree, known for its “everything for a dollar” business model, has raised prices to $1.25.

Dollar General is experimenting with a new, higher-priced concept called Popshelf, placing 1,000 stores in middle-income areas that sell slightly more expensive products. Household income in areas that host a Popshelf could be as high as $125,000. Five Below is another discount store that has raised prices, although the chain first did so in 2019, before the pandemic. The store, known (as the name suggests) for selling items $5 and under, has started offering some items up to $10. These items — mostly branded toys, games, and electronics — sell in their own sections of the store, called the “Ten Below Gift Shop” and “Ten Below Tech,” respectively.

Although most Five Below offerings, which include candy and beverages but little other food, still sell for $5 or less, The Business of Business found that the average cost of a Five Below item in August 2021 was $4.69, about 73 cents higher than the average (pre-pandemic) price in August 2019.

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Nonetheless, it was grocery prices at dollar stores and discount stores that were hit the hardest by inflation. Prices for groceries and household items rose 11.5% and 15.3%, respectively, in February, reports The Street. That’s higher than the national average for inflation that month, which was 7.9% according to Bureau of Labor Statistics figures.

Between 2020 and 2021, the price of groceries in dollar stores has increased by 22.5%. Costs continued to rise from 2021 to 2022, rising another 14.3%, according to The Street. Meanwhile, online grocery prices have risen 12.4% since 2020.

However, dollar stores remain one of the most affordable options for purchasing certain groceries and household items, and that may be why consumers continue to shop there despite rising prices. Foot traffic has increased by more than 20% at Family Dollar since 2019. Similarly, Dollar General has seen a 28.2% increase in traffic.

Dollar Tree traffic rose 13.7% despite some shoppers openly protesting the company’s 25-cent price hike on social media. In fact, 91% of Dollar Tree shoppers said they would continue to shop at Dollar Tree with the same or increased frequency because the price increase allows the store to deliver even more items at a lower price. extremely advantageous, according to an earlier report by GOBankingRates. .

Five Below also continues to do well, adding 269 stores in the United States since the start of 2020.

Learn: How much does inflation really cost the average family each month?
Explore: The current inflation rate is scary, but not as scary as it has been during other periods in recent history (infographic)

As inflation continues to rise, dollar stores will remain a tool shoppers can use to stick to their grocery budget and feed their families. A dollar may not stretch as far as it used to, but the prices of most items are still lower than what you would spend on the same products at traditional grocery stores.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketer with interests in finance, e-commerce, technology, and real estate. His long list of publishing credits includes Bankrate, Lending Tree and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology and entertainment website. She lives in Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten and three lizards of different sizes and personalities – plus her two children and her husband. Find her on Twitter, @DawnAllcot.