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Will Family Dollar’s New App Solidify the Loyalty of Shoppers Who Traded Down?
Family Dollar is enhancing its mobile shopping experience with a revamped mobile app that will include a redesigned wallet for easier coupon management and intelligent product searches. The app, which will be launched in October, sets the stage for a larger digital transformation at Family Dollar — a sign that even off-price retailers are stepping up their technological capabilities.
Planned features for Family Dollar’s digital transformation include in-app e-commerce, personalization capabilities, and an “evolved” reward experience, which are all planned for early 2024. The company’s ultimate goal is to improve the overall customer journey with better digital tools.
“At Family Dollar, we wake up every day focused on how we can help our shoppers do more and save more, and this app is one more way we’ll be able to deliver on that promise,” said Emily Turner, chief marketing officer at Dollar Tree, in a statement. “We believe this new user experience will not only appeal to our customers, but to brands who want to promote their products to our millions of customers through Chesapeake Media Group, our retail media network.”
Off-price retailers have traditionally fallen behind their higher-priced competitors when it comes to technology. Marshalls didn’t launch an e-commerce site until 2019. Burlington Stores shuttered its digital operations in early 2020 due to accounting for less than 1% of total sales, while T.J.Maxx launched a site later in the year due to customers being reluctant to return to stores, according to The Wall Street Journal.
However, Family Dollar has good reason to invest in the mobile experience, even if its peers don’t see strong returns from digital investments. A survey by McKinsey found that 80% of consumers said they’re changing their shopping behavior by trading down due to economic pressure, with switching retailers among the most common ways to find greater savings.
These shoppers are likely used to the omnichannel journeys that mainstream and luxury retailers have been investing in, and the digital transformation could help Family Dollar maintain the loyalty of shoppers who planned to trade down temporarily. Features like digital coupon clipping are standard for mainstream grocers, and having access to that through the Family Dollar app could enable bargain hunting while providing a familiar experience.
It’s also possible that the world is simply so digital that no retailer can afford to fall behind with its mobile options. McKinsey also found that 81% of respondents used omnichannel approaches for product research as of March 2023. A good mobile app is key to letting shoppers browse however they want, whenever they want.
Discussion Questions
What do you think was the main reason for Family Dollar to upgrade its mobile app? Do you expect off-price retailers in general to start making more investments in their technology?
Poll
Loading …BrainTrust
Chuck Ehredt
CEO, Currency Alliance
Joel Rubinson
President, Rubinson Partners, Inc.
This push into digital is more about developing media networks and driving advertising revenue than it is about customers. That’s not to say it’s a bad thing for shoppers per se; but most of the visits to Family Dollar are for essentials and shopping missions and trips are relatively straightforward, so digital is not the foremost consideration. As for wider off-price, I am sure they will continue to invest gently in digital but, as we have seen from the results of TJX, Ross, and Burlington, heavy digital investment is not a prerequisite for success. Indeed, Nordstrom Rack invested significantly in digital and it has not paid dividends.
Family Dollar’s new app is a sign of the times, with shoppers searching for values—and doing a lot of that searching online. I believe off price retailers need to make the investment. They have traditionally been reluctant to invest in eCommerce technology in an off-price world, for a number of business reasons like low margins, inventory challenges, and assumed lack of smartphone adoption among their customer base. But today’s shoppers demand a wired world, so the time has come to invest.
Giving shoppers a familiar experience, the ability to use a retailer’s branded app, will also make downshifting easier. It also gives Family Dollar a communications channel they’ll now realize they’ve been missing out on until now.
If Goodwill has its own ShopGoodwill app, then why shouldn’t every retailer include an app in its mix? At the very least, give the mobile version of your website the look, feel, and functionality of a mobile app.
As Neil mentions below, this is probably more of a move to capture enhanced media revenues from advertising, but in general, I think any US retailer with over 50 stores can afford to invest in digital channels – and not doing so limits their appeal to a broader audience. In Europe, mainstream retailers, as well as off-price retailers have been investing in their apps for many years and customers would simply reject them as an alternative if such a channel did not exist.
Furthermore, the more you can get customers engaged via digital channels, the easier it is to upsell and cross-sell, suggest items for their shopping basket, and improve personalization. Brands can allow the teams supporting digital channels to become huge and therefore, expensive, but a small team of 2-4 people can often achieve the same results if working in a more agile manner. Keeping cost down, so ROI is up is the best way to deliver value to customers – and thereby create loyalty.
Technology in general, and mobile apps in particular, have become important assets to retail operators. Family Dollar is no different. To attract the attention of suppliers to support retail media efforts, demonstrate to consumers that the operation is keeping up with other retail formats and open to out-of-store communication channels, and to offer an omni-experience to its shoppers, Family Dollar needed to jump onto this bandwagon. Do I anticipate a significant return on this investment? Likely not. But without it, they run the risk of losing ground.
Retail media is certainly a driver of this. Another driver is digital promotions. Digital promotions are on the rise, over 300% increase in volume over the last 2 years. Not only is it a flexible, dynamic asset for retailers, it is proven effective at driving frequency for brands – depending on the category this increased frequency of purchase can result in a spend increase of up to 80% in the course of a year. A well designed and supported mobile app is essential for any retailer, but especially a retailer competing for the value shopper.
The motivation to shop Dollar stores has to be carefully understood to make the app valuable to their shoppers. I have not seen the app but some kind of reward program with cash back (to be spent at their store) could be attractive. Maybe product reviews since a lot of the brands there might be off-brands that a shopper has not heard of before. In order for shoppers to sign up, regardless of the business purpose (loyalty, retail network, etc.) first and foremost, it has to be valuable to the shopper and their mindset with respect to what they seek from that store.
Family Dollar is getting ahead of the pack with this one. It’s not if these off-price retailers will invest in apps (and other technologies). It’s when. And as the price to do so decreases, the likelihood we’ll see more business (from all industries) upping their technology game.
Why did they upgrade it?? Because there’s really no reason not to: this is an excellent example of something a large retailer can do (for essentially zero-cost-per-customer) that a small retailer simply can’t. How much use it will actually get I don’t know, but again, there’s no reason not to do this.
The poll that starts this conversation gets to the heart of the matter. Most Americans use between 3-10 shopping APPs, so competition for space on your phone screen is fierce. In China they solved this with WeChat mini programs where all retailer/brand APPs live in WeChat “mini-programs”.
I think there is enough shopper diversification out there that the DOLLAR APP would have a fairly big audience.
I also think it’s a needed move from an advertising and alternate revenue ecosystem POV.
When it comes to extreme & value retailing, I am always reminded that some consumers need to save money & all consumers like to save money. This latter group is the candidate for the use of the Family Dollar mobile app. Savings & convenience blended technologically, a perfect combination.
Upgrading the app is a great idea. The loyalty is there and the products sold make sense for consumers to shop this way.
This is a smart move by Family Dollar, regardless of the motive: get more down-trading consumers or to uplevel commerce technology. The bottom line is that omnichannel shoppers are the most valuable shoppers.
If 80% of consumers expect to trade down then Family Dollar will be there to meet them however and whenever they want to shop. Tech investments are not easy for off-price retailers but this potential ROI for Family Dollar is worth it.