Dollar Store, Will it become Beauty Supply’s Rival?
In an article last month, we took a look at the infinite growth of dollar stores. The main customer base of the dollar store, which is currently growing tremendously, and beauty supply overlaps. It could be a win-win situation if each store has its distinct area of sales. We could expect that customers who purchased basic necessities at the Dollar store may want to stop by at the Beauty Supply retail store next door. But our opponents are the new predators of the distributing business who jumps in and tries out every item that sells. In the Dollar Tree store, there are hair products and dye products in one corner already. Furthermore, Dollar General has launched its own brand of cosmetics.
Beauty Supply owners say: No matter what, it doesn’t change the perception of customers. If people want to buy hair and beauty products, they’ll look for a beauty supply, not a dollar store. Oh, it may be like that. Yet. But for how long?
You know this is the time when you should keep your friends close… but your enemies CLOSER. In that sense, we have analyzed the status and strategy of dollar stores, focusing on Dollar General’s beauty business, which has most aggressively expanded its power.
Identify Customer Needs- Get What’s Working and Give Up What’s Not
Among the Dollar General’s shelves full of basic necessities, a Starbucks refrigerator stands. The refrigerator, which even has the mermaid logo, is filled with a variety of Starbucks drinks, and one Frappuccino is $2.75 or two is $5. (Of course, a same-sized frappuccino in Starbucks stores costs $3.95) It seems like a luxury that doesn’t suit the dollar store. However, unexpectedly, it sells well. This is more so in rural villages where the nearest Starbucks store is a 30-minute drive away.
According to global market research firm Kantar, about 57% of Dollar General’s customers have less than $ 49,900 in household income and 30% have less than $ 25,000, thus relatively low-incomed people(as of 2019, the median household income in the United States is about $ 61,000).
However, the Dollar store caught customers’ conspicuous consumption desires. “Dollar General can provide her with both good ‘value’ and ‘luxury’ to buy what she wants,” said Todd Vasos, CEO of Dollar General, citing a female customer who said, “Not having a lot of money doesn’t mean not wanting to buy good things.”
As he said, dollar stores quickly identify consumer needs and avoided the woes of the economic downturn that had impacted many retailers. They read the ever-changing flow of the industry and jump right in if they seem to have feasibility. Recently, their focus is fresh food, healthcare, and beauty.
After Fresh Food, They Aim for Herbs in Healthcare
In January 2019, Dollar General launched the “DG Fresh Initiative,” which deals with fresh food. While the fresh food business was known to be unwieldy and margin-less, Dollar General was able to move further into communities that needed more grocery options through DG Fresh and compete against business giants such as Walmart and Wholefoods.
The food market in the United States is ranked second in the world after China, with a whopping $ 1.27 trillion (as of 2018). In addition, since the COVID19 incident, the demand for fresh food has increased dramatically as families refrain from eating out and prefer to eat ‘homemade meals’. In fact, in the case of Dollar General, sales of stores that started selling fresh food have increased by 10-15% and are currently pushing to increase food stores from 1,300 to up to 10,000 over the next few years.
If there is another area that has gained popularity with COVID19, it is health care. In July this year, Dollar General announced that it has hired a chief medical officer and plans to provide health-focused products and services with the goal of becoming a “health-care destination.
Michael Lasser, analyst at UBS Investment Bank, said that “Healthcare is bound to increase in demand in the U.S., given the aging trend.” “Given that Dollar General already has a high presence in rural areas of the United States, strong growth will be possible if it can attract more customers with healthcare-related services,” Wall Street Journal(WSJ) said.
Headed for Beauty Supply Now
“We Believe in the Power of Beauty for All”
This is the motto of its own brand “Believe Beauty”, which Dollar General launched in March 2019.
In order to attract millennials as customers, Dollar General joined hands with SNS beauty bloggers to launch an inexpensive cosmetics brand that can be used literally by everyone without any financial burden. The products that are sold range from tinted cosmetics such as lipstick, eye shadow, and foundation to beauty tools such as artificial eyelashes and makeup brushes, with a total price of less than $5. “Believe Beauty” is currently sold exclusively through more than 17,000 Dollar General stores and websites.
According to Drug Store News, Dollar General CEO Todd Vasos has decided to build market share in the beauty industry and has steadily invested in better lighting and an upgraded assortment of products in the beauty section since its launch. Why is Dollar General so into the cosmetics industry? Why do you need a beauty line for a Bargain sale miscellaneous goods chain? The answer can be found in the size of the beauty market, which has surged over the years.
Beauty Market Size by Type in the United States
Following steady expansion, the U.S. beauty market reached $ 91.7 billion last year(2020)., P&S Intelligence, a market research firm, estimates that the cosmetics and personal care products market will reach $ 128.7 billion by 2030. To the dollar store perspective, it is an attractive market to try to win in.
There are many expensive beauty brands on the market already, many of which are sold by celebrities. Brands such as Kylie Cosmetics, Kim Kardashian’s KKW Beauty, Rihanna’s Fenty Beauty, and Lady Gaga’s Haus Laboratories. To compete with that, Dollar General has chosen influencer marketing to promote the low-cost brand “Believe Beauty”.
How to Use ‘Word of Mouth Marketing’ Through SNS
Beauty influencers were already dealing with it on their blogs before ‘Believe Beauty’ products filled all of Dollar General’s shelves. This is because Dollar General has conducted promotions for YouTube users and Instagram influencers. Shortly after its launch, CNN reported that ‘Believe Beauty’ had received dozens of reviews and hundreds of thousands of views on YouTube, thanks to popular beauty bloggers such as Juicy Jas, Emily Noel and Kelly Strack, and the hashtag #believebeauty on Instagram had thousands of posts.
In general, Dollar General visitors do not look for their stores to buy cosmetics. Some people may be reluctant to try them out due to the perception that they are low-cost cosmetics made by miscellaneous goods chains. But what if a strange brand that has a place in one of your favorite stores is often mentioned and promoted by the best beauty influencers? What if you can get professional feedback on various products through YouTube, Facebook, and Instagram? And what if the price is so low that it’s not a big deal just to try it out? This was what General Dollar was aiming for.
Thanks to social media, the ‘Believe Beauty’ collection had smooth start, building new unexpected momentum in just a few months. Two years after its launch, Youtube has steadily posted hundreds of thousands of review videos, and Instagram accounts are also seeking a follower “boom”. Currently, the ‘Believe Beauty’ account has about 16,700 followers, and the parent company Dollar General account has 205,000.
Dollar General calls the store’s most frequently visited customers and customers with the lowest annual income “BFF(Best Friends Forever),” while the middle-class customers are called “friends.” Thanks to influencer marketing, their “BFFs”and “friends” are increasing more and more.
In addition, Although Dollar Tree does not make its own brand, it handles beauty products at low prices and is constantly updating its product types. Like Dollar General, there are many people who post reviews on blogs and YouTube videos about Dollar Tree’s affordable beauty products. Of course, there are favorable reviews, while there are also criticisms such as “Money talks, this doesn’t.” However, everyone agrees with the price competitiveness of the dollar store’s beauty products.
A Wise Way to Stand Up to the Dollar Store
Not all Products in the Dollar Store are More Affordable
Let’s not be tricked by “Less than $5.” In fact, when you go to a Beauty supply store, you can often find items that are similar to or cheaper than at a dollar store. It’s just that people think that Dollar store=Lowest price. It’s recommended that you constantly remind your customers of this bias, and give them lots of product testing opportunities.
Lip gloss is $1.99, and foundation is $2.99 cheaper at Beauty Supply retail stores, compared to liquid lip and foundation from the Believe Beauty brand for $4-5(and there are testers!)
Still Think Dollar Stores are Cheaper? Compare Oz and Ingredients
In overall price competitiveness, it is difficult to catch up with dollar stores that bring in large quantities cheaply or produce PB products or their own brand products. However, when you look for product reviews of the Dollar Store, you can also find that shampoos and cosmetics are ” products you shouldn’t buy.” It’s because the safety of ingredients isn’t guaranteed, or the price is cheaper because the amount is different than normal products in regular beauty stores. With that in mind, let’s highlight the advantages of ingredients and amount compared to dollar store products when selling products.
Display it Plain and Visible!
In most dollar stores, beauty products were placed on large shelves within the store. Especially for Dollar General, the ‘believe Beauty’ products are located at the end cap of the store aisle, so it is easy for shoppers to find them at the store. On the other hand, in beauty supply stores, cosmetics and makeup tools take up only a small part of the display rack. This is because cosmetics are not the main products of the store. However, this way, the cosmetics corner in the beauty supply store is bound to be smaller. On the contrary, on the shelves of Dollar stores, not only cosmetics but also various hair chemicals may soon be placed. In fact, ‘Believe Beauty ‘ was co-developed by Dollar General and Maesa, which is also the company that developed Target’s Kristin Ess hair care.
Beauty Influencers? We’re Experts!
This is the most important part. The Beauty Supply retail store can’t ask famous beauty influencers to promote their products. You can’t do promotions on a budget, nor can you promote just one of the many products from different manufacturers.
If so, then you should become an expert yourself. The seller has to act as an influencer. You must examine and learn the details of the products sold in your store, such as their usage, ingredients, and features. It would be even better to use it yourself. If you are good at SNS, you can post on Instagram, Facebook, etc., and if not, you can give a detailed introduction to customers looking for products in your store. At least in this field, Beauty supply owners and employees who have been in place for decades should appeal to their customers with confidence that they are the best professionals.