Shoppers Buying Groceries at Dollar Stores as Food Inflation Persists

A clerk brings in a shopping basket at a Dollar Tree store in Richland, Miss., on Nov. 26, 2019. Dollar Tree and Dollar General both reported sales increases for the fiscal second quarter, on Aug. 25, 2022, Rogelio V. Solis/AP Photo

U.S. consumers have been increasingly turning to dollar stores for groceries, as supermarket prices remain more than 10 percent higher this year, new data show.

Coresight Research found in a January 2023 report that 20 percent of U.S. shoppers visit dollar stores for their grocery items.

“If [Dollar Tree and Dollar General] continue to improve the quality of their fresh food while maintaining the low prices associated with their brands, there is a high chance it will bolster their value proposition with their existing consumer base and also pull in new customers from higher-priced retailers,” the Coresight report states.

Dollar Tree is “developing an assortment to meet our shoppers’ family needs as they are looking to save money by dining at home,” CEO Mike Witysnki confirmed in a quarterly earnings call in November.

“We are aggressively expanding our offerings of protein, pizza, breakfast items, and family sizes at price points that meet their budgets,” he said.

Dollar Tree and Dollar General are the fastest-growing food retailers in the contiguous United States, according to a recent study authored by Tufts University researchers and published in the American Journal of Public Health. The latest consumer trends have led these companies to add stores and remodel existing locations to include more refrigeration units and additional grocery offerings.

The researchers noted that low-income consumers and minority households are shopping more at dollar stores for food, a trend that they say could affect nutrition.

“Dollar stores play an increasingly important role in household food purchases, yet research on them is lacking. Many localities have established policies such as zoning laws aiming to slow dollar store expansion even though we don’t fully understand the role that they play,” said Wenhui Feng, first author of the paper and Tufts Health Plan professor of health care policy.

A shopper selects items at a Dollar Tree store in Pasadena, Calif., on June 11, 2020. Mario Anzuoni/Reuters

Meanwhile, shoppers are also relying more on credit to fill their fridges and cupboards.

More consumers have turned to buy-now-pay-later (BNPL) services over the past year to pay for groceries, Adobe Analytics data show. The report found that BNPL to fund grocery purchases rose by 40 percent year-over-year in the first two months of 2023.

A February U.S. News survey revealed that 22 percent of shoppers used BNPL to buy groceries.

Thirty-five percent of respondents reported using BNPL because they “didn’t have enough money to buy the item outright,” and 16 percent said they bought more items than they could afford otherwise.

But while households are trying to save on their grocery bills by frequenting neighborhood dollar stores, some food items might be unavailable.

Soaring Egg Prices Strike Dollar Tree

Dollar Tree will no longer sell eggs as prices have become too expensive for the company in recent months.

A corporate spokesperson confirmed to Reuters that the discount retailer would remove eggs from its store shelves as the cost of a dozen eggs exceeds the retailer’s $1.25 price point.

Most of the merchandise sold at Dollar Tree is priced at $1.25, although there are some select products that sell for $3 and $5. By comparison, the average price for a dozen of large grade A eggs is $4.21, surging more than 55 percent year-over-year in February.

Since the Bureau of Labor Statistics began monitoring egg prices in January 1980, the cost of a dozen eggs has ranged between $1 and $2. In February 2020, before the COVID-19 pandemic, the average price for the common kitchen staple was $1.45, soaring 190 percent since then.

Egg prices fell nearly 7 percent month-over-month, partly because three states confirmed cases of avian flu among commercial table-egg farms in the past 30 days, allowing more suppliers to recover inventories. Experts have said that prices might have peaked. But market analysts warn that with Easter and Passover on the horizon, strong demand might send eggs higher again.

But that doesn’t mean that Dollar Tree will abandon eggs altogether. The company expects to restock its shelves with eggs once market conditions stabilize.

The egg industry has been hit by a bad case of the contagious and lethal highly pathogenic avian influenza. In the past year, tens of millions of egg-laying hens have been infected and slaughtered. In addition, farmers have endured higher input costs, including those of labor, energy, and feed.

The U.S. Department of Agriculture (USDA) projected that egg prices will rise 37.8 percent in 2023, “with a prediction interval of 18.3 to 62.3 percent.”

“This wide prediction interval reflects the volatility in retail egg prices,” the USDA stated.

The USDA’s Agricultural Marketing Service reports that total weekly shell inventories were up 4.4 percent for the week ending March 20 (pdf).