ShopperCulture.com recently published a post on who’s up and who’s down in the current retail climate. Not surprisingly, retailers with a strong value proposition lead, like BJ’s Wholesale Club, Ross, Costco and Wal-Mart. Recently a somewhat overlooked format has emerged as a leader for today’s economy-conscious shoppers: Dollar Stores.
You may be surprised to know that two dollar stores chains appear in the Fortune 500 list of America’s biggest companies: Dollar General (#259) and Dollar Tree (#499). Still a long shot from Wal-Mart, Fortune’s no.2 company following Exxon Mobil, Dollar Stores are nonetheless growing faster than other retail formats, according to a recent article in The New York Times.
My personal recollection of dollar stores is that of cluttered, disorganized environments usually set in a downscale strip mall, with boxes blocking the aisles, cleaning products, stacks of Little Debbie cakes and dusty two-liter Coke bottles, and no assistance to be found without dislodging a cashier who is already serving a long checkout queue. According to The New York Times report, times are changing. Dollar Stores are becoming more mainstream: selecting better locations (often left unoccupied by failed retail tenants), widening aisles, reorganizing store layout, even adding refrigerators and freezers in order to steal share from Grocery.
Family Dollar plans to open 200 new stores this year; Dollar Tree will open 235 new stores and relocate 90 existing ones; and Dollar General, the category leader, will open 450 new stores and relocate or remodel another 400. Dollar store executives realize that time is of the essence.
There is a strong element of psychology behind dollar store
merchandising. Most dollar stores attempt to stay true to the promise
of goods for $1 or under. Last Year, Dollar Tree tried selling items
for more than $1, but the result was lackluster and prices have been
adjusted back to the dollar-or-less price point.
Which leads us to two questions. What happens when inflation (which is low these days) makes it impossible to sell goods under the $1 price point. Smaller packaging? 10 eggs for a dollar instead of 12? And what happens when the economy recovers? Dollar store executives are banking on the format to become mainstream and to enjoy growth even in a strong economy. But old perceptions, like mine, may prevent dollar stores from ever becoming mainstream. ShopperCulture welcomes your thoughts.