See inside Five Below, the fast-growing discount chain that sells everything for under $5 (2024)

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Five Below is a growing chain of discount stores with the same model as dollar stores —nearly everything sells for $5 or less.

The COVID-19 pandemic made online orders surge, but most brick and mortar retailers were hit hard by restrictions, and many permanently or temporarily closed.

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Five Below is one of the few chains, along with some other discount retailers, that actually added stores. It opened 120 in 2020, with plans to open another 180 in 2021.

Source: Insider

Walking inside, it's easy to see why Five Below has been so successful.

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The chain's merchandise is constantly changing, and the pieces are always very trendy, like candles, fuzzy blankets, and faux plants.

Inexpensive decor mimics similar pieces at popular stores like Home Goods and TJ Maxx, but at lower prices.

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With sales of pool supplies and other outdoor accessories booming, Five Below is on-trend selling pool noodles, outdoor games, and swimming goggles.

A pandemic spike in pool ownership and the arrival of summer meant that goggles and pool toy displays were all over the store.

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Five Below consciously stays on top of trends to appeal to young buyers. "We target an attractive customer segment of tweens and teens with trend-right merchandise at differentiated price points," the chain said in its annual report.

In other words, Five Below portrays itself as a trendier, younger version of a typical dollar store.

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A major portion of the store is dedicated to electronics.

Keyboards and headsets are advertised especially for gaming.

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Five Below doesn't really sell video games, which would be too expensive for the store premise, but gamers can find all the necessary accessories for playing.

Even end caps seem aimed at teens, with brightly colored AirPods cases.

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School supplies are another big part of Five Below's inventory, indicating the chain's young customers.

Displays of pens, pencils, and glue sticks wouldn't look out of place at big box stores like Walmart and Target ahead of the new school year.

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The back wall of the store is full of workout and athletic supplies.

The store sells dumbbells, kettlebells, yoga mats, resistance bands, and other low-cost training equipment.

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These workout supplies are behind more than a dozen buckets filled with footballs, soccer balls, volleyballs, and more.

It also sold bicycle helmets, which were in short supply and difficult to find earlier this year.

Source: Insider

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Some parts of Five Below seem designed to appeal to tweens and even younger.

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From the action figures to t-shirts, Five Below has plenty of pop culture merchandise, almost like a discount Hot Topic store.

About a quarter of the store is dedicated to low-priced hair accessories, makeup, and skincare.

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Inexpensive palettes and familiar drugstore makeup brands cover shelves on one side of the store.

These products seem to target Five Below's customer base between the ages of 5 and 19 with "a significant amount of disposable income," according to the chain's annual financial report.

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The rest of the store is filled with knick-knacks, snacks, craft supplies, and other fun non-necessities.

Most of the products at Five Below could be found in stores throughout a traditional mall or even CVS or Walgreens, but Five Below's strategy is that "we offer all of these products in an exciting and easy to shop retail environment," the company said in its annual report.

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Five Below also stays relevant to young buyers with constantly changing inventory.

To reach the checkout area and leave, customers have to walk through a large display of candy and snacks, a kind of enhanced version of checkout lane candy bars in a grocery store designed to be noticed by customers and purchased at the last minute.

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Five Below says the variety of classic and new candy options and seasonal offerings are also designed to appeal to teens and tweens.

This location only had self-checkout machines, with no cashiers.

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Five Below's huge selection of low-priced items that appeal to young customers is the reason for the chain's success. As long as teenagers have disposable income, Five Below is well-positioned to keep growing.

Do you have a story to share about a retail or restaurant chain? Email this reporter atmmeisenzahl@businessinsider.com.