Five Below (FIVE) has made its mark in the retail industry since its founding in 2002 as a premier discount specialty store, where the majority of the trendy products in the store is listed for $1 to $5.
This last year has definitely given Five Below a little insight into how consumers are feeling about the economy. With more people being price cautious, it led the retailer to see quickly when customers were feeling a bit better about the economy by what they were buying. The discretionary spending habits started to ease even as Five Below’s consumable products continued to lead in sales, according to Ken Bull, Five Below’s Chief Operating Officer and interim Chief Financial Officer.
DON'T MISS: Kohl's Reinvents Itself While Giving Something Unique Back
The discount retailer, with over 1,100 retail locations in the United States and 14,000 employees, is expanding its reach over the next year. Despite some challenges only about 30% of planned stores will open in the first half of 2023, down from 40% from prior plans. The expansion still leads Five Below, with locations in 40 states, to expect the number of open stores by the close of 2023 to be above 1,500.
Shutterstock
Five Below Expands Business Structure
The whole business structure plays off other businesses, including Dollar Tree (DLTR), Family Dollar and Dollar Bills, which started back in 1953. The Five Below competitor Dollar Tree recently had to make a major disturbing change to their business structure, as the chain started listing prices on select products over the $1 price point. Inflation had made it necessary to raise prices on select products, while other products price points will not change.
Five Below is following this trend as it introduced Five Beyond into its stores and will continue to expand the higher price point section to be part of its retail floorplan in 400 more stores in 2023. The Five Beyond concept allows the discount retailer to counter inflation by marking prices higher than its business structure and also begin to expand the retail trends with more choices of higher priced and more trendy products.
The pricing structure isn’t just to counter inflation, but according to Joel Anderson Five Below’s chief executive officer, after converting 250 of its current store floor plans to include Five Beyond, the retailer found that customers who buy from the Five Beyond section spend more than double what customers spend when they only buy from the Five Below product lines.
“That is one reason the company wants to introduce the concept to 400 stores this year. And ultimately, our goal is for Five Beyond [to be] everywhere,” Anderson stated.
Five Below Expands its Products and Services
Five Below is venturing into offering some basic services as well. The retailer is now offering ear piercing and is moving into party supplies and offering helium balloons. These retail moves allows customers to shop in one stop, buying a variety of candy, snacks, health, beauty and trendy toys and accessories and a way to package them up for birthdays and celebrations at a discounted price.
One-stop shopping enables the retailer's customers the ability to get in and get out more quickly than big box stores like Walmart and Target. When considering more direct competitors, like Dollar General and Dollar Tree they are also expanding with higher priced items.
“However, at present Five Below still has an edge with the quality and breadth of its offer and with its format which is generally seen by consumers as more fun and engaging,” according to GlobalData managing director, Neil Saunders according to Retail Dive.
