Miniso taking on the dollar stores
Company aiming for 100 Canadian stores by the end of 2018
Miniso, is not, as has been reported, a Chinese dollar store. It is not a Japanese dollar store. In fact, it is not a dollar store.
But it may give Canadian dollar stores a run for their money.
When the first GTA Miniso opened in October at Pickering Town Centre in a slip of a space — 1,500 square feet — shoppers lined up to buy the retailer’s whimsically designed plushies, cosmetics and homewares and electronics, ranging in price from $2.99 to $34.99.
“It’s fun, it’s fresh, it’s new,” said Pickering Town Centre general manager Diane Camelford, explaining the appeal.
“Our philosophy is high-quality goods at an affordable price. So if people call us a dollar store, that’s fine with us, but we’re more of a variety-retail, lifestyle store at a very reasonable price,” said Sherman Leung, district manager, Miniso Canada Investments Inc.
Miniso, launched in 2013, is the result of a collaboration between a Japanese designer and a Chinese entrepreneur. It is headquartered in China, where it has more than 1,000 stores and is a mainstay in malls and at transit stops, Leung said. The company also has stores in the U.S., Mexico, Australia, Europe and the United Arab Emirates.
It opened its first Canadian store in the spring in Vancouver and expects to have about 18 in operation in B.C., Ontario and Alberta by 2018, including locations at Oshawa Centre, Hillcrest Mall and Upper Canada Mall.
It’s aiming for 100 stores in Canada by the end of next year and 500 in three years, which is still less than half as many locations as Canada’s most successful dollar-store operator, Montreal-based Dollarama, with 1,135 locations.
The other dollar store chains in Canada together operate fewer than 500 locations: Dollar Tree has 226 stores; Dollar Store with More has 125, Great Canadian Dollar Store has 99 and Buck or Two has 47.
And Dollarama is still expanding, at a current rate of about 60 to 70 new stores per year, with each averaging 10,099 square feet and stocking an estimated 4,400 items. Party supplies and seasonal items are a big draw at Dollarama.
Miniso stores vary in size, but the largest in Canada to date is at Bramalea City Centre, at 4,300 square feet, selling 2,500 items, just 500 more than the small store at Pickering Town Centre.
Plushies are the biggest seller, according to Leung — a hit with the store’s millennial target market.
Mall managers like the chain because although Miniso’s target market is 18 to 35, the stores hold appeal for shoppers in all demographics.
“I think it’s for every shopper, to be honest,” said Hillcrest Mall general manager Brian Marentette.
The Miniso expansion comes at a time when analysts have been questioning the value underpinning Dollarama’s soaring stock price and whether the sector is ripe for change.
Dollar stores began expanding rapidly after the 2008 financial crisis and the sector is ready for innovation, according to Doug Stephens, founder, Retail Prophet, a Toronto-based retail advisory.
“I think there’s an opportunity for someone to come in and say: We know you want inexpensive stuff, but that doesn’t mean that you can’t have nice design at the same time — kind of like what Ikea did for furniture,” Stephens said. “If Miniso gets it right . . . I think they could take a chunk out of Dollarama.”
Dollarama shares, which hit a high of $166.62 on Nov. 28, suffered a setback after third-quarter earnings released on Dec. 6 failed to meet some performance targets set by analysts. Same-store sales growth was 4.6 per cent, below forecasts of 5 per cent and higher, driving share prices to a close of $149.73 for the day.
BMO Capital Markets analyst Peter Sklar called the initial adverse reaction “overdone.” Desjardins Capital Markets analyst Keith Howlett, meanwhile, kept a buy rating on the stock, calling Dollarama “the best organic growth story within our coverage universe,” with a target of $165.
Dollarama company executives seem so far unfazed by the threat presented by Miniso.
“We consider all retailers to be our competition, of course, and as far as Miniso goes, we consider them a pure China-based, Chinese import dollar store,” said Neil Rossy, Dollarama president and chief executive officer, on the company’s earnings call.
“They do a very nice job in stores about a quarter to a third the size of ours, but their merchandise is focused on a very different customer base than ours. It’s very much design-oriented non-essentials.p We’ll continue to watch them, as we do all other retailers in Canada and abroad, and we have been watching them well before they came to Canada, and we will consider them as competition, as we consider all the other retailers in Canada as competition, but there’s nothing for us to react to at this time.”
Whether Miniso can catch up to Dollarama remains to be seen — for now, analysts aren’t exactly betting on it.
Retail expert Farla Efros, president, HRC Advisory, believes the future for Dollarama lies in moving the price point as high as $5 to $6 over time, pointing to Five Below in the U.S., founded in 2002 and expanding rapidly across that country, with more than 600 stores in 32 states. The chain sells everything for $5 and under.
“Like everybody else, quarter-toquarter Dollarama will go up and down, but I think they still have a good opportunity in the market,” Efros said.
Alex Arifuzzaman, founder of InterStratics Consultants Inc., says Dollarama is not in mortal peril yet. “It would take a while to ramp up to the number of stores needed to affect Dollarama,” he said.
“We’ll continue to watch them . . . and we will consider them as competition, as we consider all the other retailers in Canada as competition.” NEIL ROSSY DOLLARAMA PRESIDENT AND CEO