Discounters to Change Everything Online

There’s a big difference between dollar stores and other discount retailers in the online environment. Dollar stores, by their very name, are restricted in how they can price their assortment. Their margins make it difficult to offer free shipping, which is becoming an online standard.

Other discount retailers have the ability to price as they choose and can more easily offer free shipping. I see more opportunity for them.

Will e-commerce be the hula hoop for price-format retailers during the next five years? Perhaps. Price format retailers should make the most of that time capsule … and they should remember that retailing is the playground for continuing innovation and great opportunities.

Price-format retailers must keep their peripheral vision active and be watchful for what is happening elsewhere that might replace their positioning just as many supermarkets have learned.

Change is more constant than channels in retailing’s passing parade. Do you doubt that another parade is already being prepared for 2017?

A couple of things that are perhaps worth adding to the thinking here.

Most “dollar stores” have long since abandoned the single price point strategy of “$1.” Multiples of a dollar and sometimes even more flexible pricing are now the rule. With the exception of 99 Cents Only and, to a lesser extent, Dollar Tree the “dollar store” is really an “extreme value store” today.

With regard to the online offerings, some of the early offerings focus on case lots or at least multiples. So the minimum order quantity on a $1 item might be 6 or 12. This strategy gets over the hurdle of shipping and handling costs. But it also limits offerings to stock up, regimen or other multiple use items. I think this will have to change to include higher priced SKUs.

I don’t see it. I’m sure there are some opportunities, but how could these players be “game-changers”? Isn’t “lower price” already the leading value proposition for many pure play online retailers? Isn’t one of the biggest emerging threats for physical retailers that consumers are increasingly using mobile devices to scan barcodes and find stuff cheaper online (or to abandon the purchase because they see the lower online price)?

The conversation about price format retailers going online is far too one-dimensional. The game-changer isn’t that these retailers may realize significant online sales on items they currently carry in store and with their loyalist shoppers. If those were the only possibilities, who would call it a game-changer?

The word “scale” keeps comes up in retailer press releases and investor calls for a reason. The new standard for scale isn’t thousands of stores or millions of online hits — it’s both. Dollar stores may be just getting started online but they are years ahead in establishing brick and mortar scale. The former is relatively easy to ramp up by comparison. Thousands of highly-efficient, well-located small formats facilitating site-to-store pick-up for what could evolve into endless aisle assortments — perhaps even from third party sellers? Sounds a lot like what everyone else is trying to do — except they are a few thousand stores behind.

While few were paying attention, dollar stores have gone out and captured a significant piece of the market in bricks. In the end, a store is a store is a store, whether its bricks or clicks. There is no difference between the dollar formats going cyber versus any other retailer. It’s simply a store without walls.

Will they change the game? No. They are just going to get in the game. Once in, just like bricks, few will pay attention or consider them as a challenge as it is currently. In a while, they’ll capture a significant presence just as they have in bricks. When that happens, the discussion will be, how did they do that?