Columnist: Dollar Stores Worth a Look

Discussion
Oct 23, 2006

By George Anderson


Gregory Karp, a columnist with the Morning Call of Allentown, PA, says consumers who have not checked out dollar stores recently or at all are missing out.


Stores are not the dirty and dingy places that many older consumers associate with the old five-and-dime stores.


Today, consumers can walk into a dollar store and find they are clean and stocked with brand-name merchandise, fresh fruit, refrigerated and frozen foods.


Mr. Karp said it is unlikely that a consumer could do all their shopping in dollar stores but there are many categories that offer real potential for savings.


Among the better buys consumers can find, according to Mr. Karp, are holiday and party supplies, stocking stuffer toys, school/office supplies, household cleaners, paper products, containers and snacks.


The deals found at dollar stores are drawing a larger portion of the population. According to ACNielsen, seventy percent of households shoppers at a dollar store last year.


The top four chains in the channel have a combined sales revenue of roughly $20 billion and three of those businesses rank among the top 10 retailers in the U.S.


Discussion Questions: What is the state of the dollar store industry from your perspective? Where do you see the greatest opportunities for retailers
in this space to reduce operational costs while also seeking to drive top line revenues?

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12 Comments on "Columnist: Dollar Stores Worth a Look"


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M. Jericho Banks PhD
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M. Jericho Banks PhD
15 years 7 months ago
I must take exception to the characterization of five-and-dime stores as “dirty and dingy.” How would you know (Gregory Karp, not George Anderson)!? Ever been in one? Ever lived week-to-week for the Saturday experience of accompanying your dad to a Woolworth’s lunch counter for a made-from-scratch root beer and a foot-long hotdog (car parked just outside with the keys in it)? Five-and-dimes, or “dime stores,” were magical places. Clean and well-lit. When I peruse Mr. Karp’s list of Dollar Store “better buys,” I see mostly Chinese-manufactured items and rack-jobber junk. Party supplies? Stocking stuffers in July? Drop-shipped paper products? Snacks that would otherwise be in vending machines? The Dollar Stores I’ve seen are outlets, pure and simple. No amount of posturing will change that. If some of them have evolved into legitimate supermarkets that also sell Chinese junk, then that’s what they are. I’m not a big fan of importing Chinese-manufactured non-necessities which negatively affect our balance of trade. While unemployment is low and American job loss in the industry of making cheap plastic gewgaws… Read more »
Jerry Gelsomino
Guest
15 years 7 months ago

One of my firm’s newest clients, Dollar General, is not exactly a “dollar store.” However, because of its name, it is often confused for one, so I thought I would add some news into this discussion. Currently, the company has a new concept which it is rightly excited about; Dollar General Market.

The new stores offer value, quality, and convenience to its target customers, selling not only the general merchandise shoppers expect to see at a Dollar General, but also quality national brands and private label food products.

The new interior decor package, which we collaborated with Dollar General on, now brings an upgraded look to this category of store which is enticing and helpful to the customer in finding desired merchandise.

The design we developed was driven by the highly competitive nature of smaller format and “dollar stores,” who are no longer satisfied with drab, utilitarian presentations.

Mark Lilien
Guest
15 years 7 months ago

#1 greatest cost-saving opportunity for dollar stores: stop building so many and merge the strongest competitors together. Fewer outlets would mean healthier sales and margins per location. There is much too much third class retail real estate at giveaway rents. The low rents and low fixture costs make dollar stores look like an attractive proposition. But the low average sales per location doom them to inferior rates of return, low wages, and high staff turnover. Great retailing fortunes can be made via consolidation of the strongest.

Mark Hunter
Guest
Mark Hunter
15 years 7 months ago

The status of the industry is great for “dollar-stores” as they continue to move upstream and pick off consumers who traditionally shop at Wal-Mart. In fact the dollar segment in my view is the greatest threat Wal-Mart faces in the US from a competitive standpoint. The ability to open “dollar stores” quickly and cheaply gives them an opportunity to utilize locations not available to Wal-Mart.

Harry Price
Guest
Harry Price
15 years 7 months ago

The dollar stores offer real benefits for the consumer. Convenience with respect to location and product diversification while competitively priced. The aging consumer market does not require the variety of product which is displayed at the super stores and the fact that the dollar stores are smaller becomes a plus in the shopping experience. If there is a problem with these stores it would be managing them. The shear numbers of stores requires a more sophisticated form of communication to corporate.

Don Delzell
Guest
Don Delzell
15 years 7 months ago
Retail is cyclical, and this is true in formats as well as financial results. Dollar stores may be seen as the next incarnation of the five and dime stores of yesteryear. Kmart and Wal-Mart ended the era of smaller discount variety stores through the dominance of enormous selection and better pricing. Convenience, translated in terms of one stop shopping, became a key consumer need. Today, those stores are enormous. It is very difficult to go in and buy a single item or small selection of items. And impulse shopping? Please. By the time I’m 10 minutes into a Wal-Mart trip I’m desperately focusing on why I came, not really open to the many bargains found down aisles which might take me into the next county. Dollar stores are accessible. The merchandises is visible, the aisles are reasonable, and the assortment is manageable. The pricing, importantly, portrays value. Yes, the dollar store format has validity. It is occupying a niche created by the success of the super stores. Caution: it is unclear how many dollar format… Read more »
Len Lewis
Guest
Len Lewis
15 years 7 months ago

I was in a Dollar Tree store over the weekend. The amount of food, including grocery, frozen and refrigerated products they were selling, was incredible. Some of the shopping carts going out of the store looked as if they had just finished a supermarket trip.

Do not discount this segment as the dingy, unorganized dollar stores of the past. They are the new variety stores — the new Woolworths — and very effective merchandisers.

George Andrews
Guest
George Andrews
15 years 7 months ago
Choice in where, when and how we buy has become as important as who we buy from. We are targeting our shopping to our specific need at a specific time, increasing the channels of distribution we purchase from, but narrowing our retailer choices within each channel. Dollar stores are doing a good job of satisfying a unique retail niche, a quick in and out stop, a 7-Eleven on steroids. Like Clubs, discussed last week, they are carrying more items and categories on a continuous basis. This has transformed them from the “treasure hunt” and great buy store, to a regularly shopped retailer. An office or store worker can slip into a dollar store at lunch for quick snack items, a card for an associate’s birthday or forgotten office supplies in less time than it takes to cross a Wal-Mart parking lot. Their helium filled balloons, dollar toys, dollar snacks and candy and large party assortment have made them a birthday destination store for some moms. Target has been offering a small seasonal or themed dollar… Read more »
Ryan Mathews
Guest
15 years 7 months ago

All this (directionally correct) bravado aside I think it’s important to remember there are dollar stores and then there are dollar stores. This is still a relatively new channel and it’s ripe for rationalization down the road. I’m sure no BrainTrusters go wandering around the ghetto, but trust me there are plenty of funky “dollar stores” out there that aren’t well organized, clean or progressive.

Kai Clarke
Guest
15 years 7 months ago

The dollar stores are a bonanza! The writer is correct that they are changing, but they are not quite up to the same caliber of the major retailers in terms of organization and cleanliness. I would not compare these to a Target or a Safeway, by any stretch of the imagination. However they are certainly improving, and their offerings are an incredible value for the mass consumer. This is their niche and their appeal, and offering a better value add in a single location has been and will continue to be their recipe for success. As the Dollar stores grow and mature, they will become an even greater force that everyone should be aware of, and be prepared to compete with on all levels (even products greater than a dollar in price).

Robert Leppan
Guest
Robert Leppan
15 years 7 months ago

Dollar stores are doing very well and for many marketers, I believe this channel has been “under the radar.” They fill a niche for many shoppers – offering low prices on a variety of family items often in a smaller local strip mall. And dollar stores are not the dingy, dark discounters in seedy neighborhoods any more. In particular, the dollar channel has been doing a very good job at attracting Hispanic shoppers. In my previous company we saw sales increases of over 40% per year when we started addressing this sales opportunity in a serious way. However, the dollar stores must continue to offer lower prices than their competitors thru manufacturer close outs, special buys etc and not move too ‘up market’ (clean stores are nice but don’t overdo it), in order to maintain their draw as a great place to shop for bargains.

Justin Time
Guest
15 years 6 months ago

I agree with one of the commentators that the variety store of by-gone days was a super place to buy notions, everyday dishware and cookware, candy, stationary, socks, a root beer float and so much more.

The dollar store is not anywhere near the quality and selection of the variety store of my childhood. However the newest versions of DollarTree are nice stores, almost like super dollar convenience stores. They have a wide selection of seasonal merchandise as well as food, hardware, crafts, notions, dishware, HBA, etc.

But some other dollar stores are really disorganized, more like modern day versions of John’s Bargain Stores.

If nothing else, these DollarTree’s are compact versions of Big Lots, but without the furniture.

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