‘ Dollar stores’ are raking in the money
Low- cost chains ride high as other brick- and- mortar retailers struggle
At a time when department stores are struggling to woo customers, there’s a bright spot amid the dismal retail landscape: the humble “dollar store.”
While retail giants like Macy’s and Sears collectively shutter hundreds of locations, Dollar General and Dollar Tree, the two biggest players among chains that typically tout prices of a single buck for most items, plan to open roughly 1,940 stores combined this year.
The discount hubs are sprucing up their bargain- basement image, spiffing up their aisles and broadening their offerings. And their small size is enabling them to take their low prices where Walmart cannot easily go — right into the heart of residential neighborhoods.
“In this environment, nobody’s doing that,” Ken Perkins, president of Retail Metrics, an independent retail research firm, said of the hundreds of planned dollar store openings. “Lower- and middle- income consumers are really looking for value, and the dollar stores are providing it for them.”
Much of the retail industry is retrenching. Sears Holdings will close 66 more Kmart and Sears stores on top of the 180 locations it previously announced. Macy’s has said it will shut 68 stores. J. C. Penney is closing 138 locations, and Radio Shack has closed more than 1,000 stores since the Memorial Day weekend.
Yet dollar stores are becoming ubiquitous, with Nielsen data finding that their number grew 58% between 2005 and 2016, to a total of 29,400. Among retail channels, only supermarkets, whose number increased by 74%, grew more.
Dollar store sales are also significantly outpacing the retail industry as a whole. Between 2011 and 2016, dollar store sales rose 48.6%, compared to the 17.1% uptick in U. S. retail overall, said Neil Saunders, managing director of retail analysis firm Global Data.
“A lot of this is ( due) to the enormous number of new stores that players like Dollar General and Dollar Tree have been opening,” Saunders said. But store makeovers and the addition of more groceries, including frozen foods, have also helped boost purchases, he said.
Dollar General has been dramatically expanding its store footprint, opening 900 stores in 2016 alone and planning to unveil roughly 1,290 new locations this year. That will mean the chain has more than 14,000 stores in 44 states.
“As we expand our presence in communities throughout the country, we continue to meet customers’ needs for everyday low prices on items they use and replenish most often,” said Dollar General spokeswoman Crystal Ghassemi.
The chain has also begun to experiment, opening up two smaller, sleeker concept stores dubbed DGX in Nashville and Raleigh, where they can try out new ways to cater to the lucrative Millennial and urban markets. And at a time when
all retailers are having to adjust to the growing number of shoppers shifting online, the dollar store chain has an ecommerce site and started a digital coupon program three years ago.
Meanwhile, Dollar Tree scooped up rival Family Dollar for $ 8.5 billion in 2014 and plans to open 650 new stores this year under the two brands. At the end of April, the company had 14,482 locations in 48 states and parts of Canada.
“Both Dollar Tree and Family Dollar are conveniently located small- box stores that deliver value and convenience to customers,” said Randy Guiler, Dollar Tree’s vice president of investor relations. “Value and convenience are key” to what shoppers prefer.
Gone are the days when everything under a dollar store’s roof cost a buck or less, though many items still do.
“They do a great job of keeping the price points as low as possible,” Perkins said. And “because of their size, they really can move into more neighborhood- focused locations and get those fill- in trips, in between the larger trips that you might make to a Walmart Super Center or to a Kroger.”
That convenience is key to dollar stores’ growing popularity. While a January consumer survey by GlobalData found that 73.1% of dollar store customers shopped there to make ends meet, a growing number of higher- income shoppers make such stores destinations because they appreciate a good deal and like having another spot where they can grab toilet paper or a gallon of milk.
The GlobalData survey found that 58.4% of dollar store shoppers said they went there for convenience, while 25.6% went to browse and see what they found.
“These more affluent shoppers like the idea of being savvy and getting a bargain on everyday goods,” Saunders said, and “since the financial crisis, many households are more cost- conscious and much more attuned to getting good value for money than they once were.”