Sometimes it pays to ignore all the noise and simply follow your own best instincts.That proved to be a good strategy for Five Below, a retail chain that banked on physical stores, introduced higher price categories despite a tough economy and listened to its customers.Five Below targets the tween and teen market where competition is fierce. Yet, unlike many of its competitors, Five Below continues to win.For the first nine months of 2023, net sales increased by 13.7% to $2.22 billion, with comparable sales up 2.6%. While net income rose 9.8% to $98.9 million for the first nine months of the year.Revenue growth and margins continue to outperform industry averages, and remain resilient against economic conditions.The company opened a record 102 new stores so far this year and are on track to open over 200 new stores for the year. They also successfully converted over 400 stores to their new Five Beyond format (items priced over $5), ending the third quarter with approximately 50% of its comparable store base in this format.“It’s not only about getting into a trend, but also knowing how to land the plane and get out of it. You’re not going to walk into our stores today and see any leftovers of past year’s trend products.”Five Below, CEO Joel Anderson, on an earnings callFive Below’s ‘Unfair Advantage’Five Below focuses on offering extreme value. It really comes down to the right product at the right price.Stores are filled with hot products that have huge appeal to retailer’s target market. It's a young girl’s paradise - and everything is priced at $5 or below.They put a twist on the dollar store model by pricing products at $5, allowing them much more room in the pricing to offer better merchandise.Teenagers have disposable income, but not a tremendous amount of it. Five Below is one of the few opportunities where they can go into the store and buy just about whatever they want using their own money. It gives them a sense of freedom and independence, which is one reason they keep coming back. That, plus the merchandise itself.Five Below is one of those places where if you walk in, you're going to buy something.Fast fashion brands also compete for this demographic offering trendy apparel at cheap prices or by touting sustainability. But Five Below is different. It captures the heart of what teen shoppers want. Merchandise like popular stuffed animal Squishmallows, deeply discounted candy, phone cases, bluetooth speakers, yoga mats, and even apparel.Each store is divided into eight "worlds," which are currently categorized as Style, Room, Sports, Tech, Create, Party, Candy, and New & Now. “It’s not only about getting into a trend, but also knowing how to land the plane and get out of it,” CEO Joel Anderson said on an earnings call. “You’re not going to walk into our stores today and see any leftovers of past year’s trend products.”Five Below isn’t about product innovation. It’s about following whatever is selling every year and getting it into the stores - at $5 or less. $5 Tees are one of the many reason's teens love Five Below. photo courtesy of Five Below A treasure trove of items for $5. photo courtesy of Five Below Understanding Physical StoresMost of the recent retail failures have been at least in part attributed to the retailer’s failure to get into e-commerce fast enough. Five Below has an online store, but its focus is on getting customers into their stores.They realized what their customer really wants from the in-store experience. Selling floors are stocked with new and trendy merchandise that lures customers to come back and discover what’s new. Each visit to a Five Below is like a treasure hunt. A chance to play in Aladdin’s cave. And to be continually surprised and delighted. Not to mention that these treasures are affordable.Stores are bright, colorful and easy to navigate giving the customer more opportunities to see everything that’s in the store.The company’s slogan is “let’s go and have fun” and that’s exactly what shoppers experience when they visit a Five Below store.Although Five Below is expanding rapidly, the growth is not just due to the company’s larger store fleet – visits per venue continue to rise each quarter. Five Below understands what their teen customers want - and they continue to deliver must-buy products Cost ControlsFive Below is really efficient at controlling their costs. Their stores are small and are located in shopping centers and strip malls. Averaging about 9,000 square feet, which is comparable to other Dollar stores. It costs $300,000 to open a Five Below store, and each new location generates about $450,000 in operating income within the first year. New stores have a cash payback period of just seven months!Once stores are open, the company uses a variety of marketing channels, including print ads, TV ads, and social media, to drive traffic.The company strips all costs out of the supply chain to sell as close to the source price as possible. They go as far as deflating basketballs so there's less weight and packaging during shipment, per a Motley Fool report.The company has also been digitizing vendor transactions, implementing a core merchandising platform, and using cloud-based data and analytics for demand forecasting and inventory management, per Zacks Equity. This is in addition to the continuous work to create more advanced planning systems and tools for predicting replenishment needs. Future GrowthDespite its strong historic growth, Five Below plans to take its 1,200 stores to 3,500 stores by 2030 and double its earnings by 2025.Regardless of how the economy performs, customers are unlikely to be squeezed out of $5 purchases, especially teens who don’t have bills to pay.The success of its Five Beyond concept has spurred the company to expand this shop-in-shop offering to more of its stores. Currently Five Beyond is in about 250 stores.Five Below’s strategic focus on improving product assortment, supply-chain efficiency and digital capabilities is expected to enhance the shopping experience and increase customer traffic.