Dollarama jumps into bulk-buying ring with rollout of e-commerce service
Retailer challenges Costco, Amazon as it continues hot sales and earnings streak
Dollarama’s move to take on Costco and Amazon in online bulk buying will be up and running by the end of the year.
The country’s biggest dollar store retailer revealed more details about its pending e-commerce rollout on Thursday after posting better than expected fourth-quarter sales and profits.
Chief executive Neil Rossy said the platform is working in beta testing, though details such as delivery costs and the final selection of goods haven’t been finalized.
“We are taking our time and doing lots of beta testing,” Rossy told industry analysts on a conference call, adding the company might debut the concept in one or two provinces later this year to get customer feedback before rolling it out nationally by the end of 2018. “We are somewhat introducing a new concept, you know, built for Costco, in the concept of selling things by the case and not by the unit.”
Costco, which requires an annual paid membership in order to shop at its warehouses, began offering bulk restaurant and office supplies at its first business centre in Canada a year ago and offers a selection of its bulk supplies online from its business centre and standard warehouses.
Dollarama is a known haven for crafters who have been known to scour multiple locations to pick up bags of river rocks and mason jars. When announcing the bulk order strategy last year, the retailer’s executives noted a segment of customers come to stores to fill large party supply orders.
“It is really meant as a tool to address a customer base that isn’t being satisfied in an intelligent useful way that need a higher quantity of our product without having to go store to store, whether that’s a person with a party, or a dog groomer who has got a small business,” Rossy said, noting items will be offered online based on practicality and cost.
“There are certain items you simply can’t ship in an e-commerce platform without it being cost prohibitive,” he said. “If you are buying wine glasses at our store and you are hoping to buy 400 wine glasses on our e-com site, it’s highly doubtful that will happen. Because the wine glasses, the way we bring them in for our retail operation, aren’t built to handle drop tests for courier companies.”
The retailer announced Thursday that it will expand its Montreal-area distribution centre to 500,000 square feet in order to reach a target of 1,700 stores by 2027. The retailer, which operates 1,160 stores across Canada, opened 65 stores over the last year.
“The website will open up a nice additional revenue stream for them,” said Bruce Winder, partner in Toronto-based Retail Advisors Network, adding the move puts Dollarama in line to compete with bigger businesses like Costco and Walmart.
“Retailers know that there is a fairly large business-to-business market out there. When Costco opened originally, it catered mostly to a business customer before evolving into more of home consumer warehouse — that’s why they are now opening up the business centres. Dollarama would have further revenue growth opportunities if they carry items that they don’t offer in their stores.”
The news comes as Montrealbased Dollarama continues a sales and earnings streak, with net profit rising to $162.8 million, or $1.45 per share, in the period ended Jan. 29.
That was up from $146.1 million, or $1.24 per share, in the same quarter a year ago and beat average analyst estimates of $1.40 per share, according to Thomson Reuters I/B/E/S.
Sales rose 9.8 per cent to $938.1 million, and same-store sales, a key bellwether of retail performance that strips out the effects of added year-over-year square footage increases, rose 5.5 per cent.