Dollar Stores Give Walmart, Grocers a Run For Their Money

Discussion
Dec 11, 2013

In good times and bad, Americans love a bargain. That’s what first led many to go shopping in dollar stores for items such as greeting cards and wrapping paper. It’s what has kept them going back for everyday consumables as operators in the channel have added grocery goods to their mix.

Every visit to a dollar store means a lost sale for another operator, be that Walmart or a supermarket chain. A recent Tampa Tribune article pointed to the growth of Dollar General in Florida, specifically its "Market" grocery format, and the impact it is likely to have on competitors in the state.

"The reputation of a dollar store comes with the territory, but we are actually not really a dollar store," Crystal Ghassemi, a Dollar General spokesperson told the Tribune. "A lot of people are starting to realize that we carry a lot of the most-popular brands on the shelf."

The Tribune article cited Kantar Retail research, which found that Dollar General offered lower prices than Walmart two years in a row. A separate pricing study done by Avondale Partners last year found Dollar General had lower prices than Walmart, as well.

In a Dec. 2012 RetailWire poll, 85 percent indicated they believed the competitive threat posed by dollar stores to other food retailers would increase over the next five years.

How do you expect the demand for cheap consumables to influence the development of dollar stores in the future? How will it influence other types of grocery retailers? Is Dollar General a dollar store?

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13 Comments on "Dollar Stores Give Walmart, Grocers a Run For Their Money"


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Cathy Hotka
Guest
8 years 5 months ago

Dollar chains have been on a growth tear for years, opening hundreds of new stores per year. They’re shrewd users of business intelligence, leveraging analytics technologies to unlock new markets and profitable products. This is a business that Walmart could have addressed…but didn’t.

Paula Rosenblum
Guest
8 years 5 months ago

There’s no doubt that dollar stores have been nipping at the edges of Walmart’s basket. In fact, my theory is that the lack of comp-store sales improvements at the giant is mostly attributable to dollar stores. That’s their strategy and it’s working.

It doesn’t matter anymore if these stores are “really” dollar stores or not. What matters is that they are selling cheap consumables (typically national brands) at a low-low price.

When I was a kid the word “Outlet” signified bargain. In fact, my father’s store was called Sam’s Outlet. I suspect if he was still alive today, he’d call his store, Sam’s Dollar Bargains or something like that.

Turnabout is fair play. Walmart stole dollars from grocers, and now Dollar stores are stealing from it. It will continue.

Tony Orlando
Guest
8 years 5 months ago
I share the building with Dollar General next door, which is their most successful and largest one in the county. I have given up on household, pop, and diapers, plus the center store overall has never been the same since they moved in 10 years ago. Dollar General is a force. They get people used to buying 22 oz. items vs. my packs of 32 oz. from the same company, and their lower price points win. However, there isn’t a whole lot anyone can do to stop these losses in the grocery aisle. The things we have done is to increase dairy space, more frozen deals, an all scratch deli, gourmet foods, and very aggressive meat specials, to bring the customers into my store, after they’ve shopped at DG. We have managed to grow 1-2% a year since they have been here, but coming to grips with the reality of the loss of grocery sales is hard to take, initially. Re-create your merchandising mix, and use the parking lot to keep drawing folks in from DG,… Read more »
Ron Margulis
Guest
8 years 5 months ago

Cathy and Paula have it exactly right on the dollar stores – they have done damage to the mass merchants and supermarket chains and they will continue to do damage to the mass merchants and supermarket chains. Smarter grocery retailers and also the better mass merchandisers won’t have a knee-jerk reaction and place “Aisles of Bargains” or whatever they could be called in the stores, but rather hone in on other product and service offerings that actually set them apart from the deep discount segment.

Gordon Arnold
Guest
8 years 5 months ago
I see the growth in any and all “Dollar Whatever The Name Is” currently running parallel with consumer economic status. Any new or sudden shrinkage in spending ability must be addressed through the budget on a priority basis. This is true for all business aspects of any size or makeup. For many months there has been much discussion of the effects of the Dollar Clans against the big box stores and supermarkets to determine which retailer group is feeling the effects of this economy the worst. Store closures, mergers, and market share numbers seem to indicate that the supermarkets are getting the worst of this for the time being. So what can we expect for the next five years or so? The dollars our government is producing around the clock and putting into the economy as another loan are creating more demand for government cash because the economy shrinkage is outpacing it’s ability to cover the so called temporary debt we employ to cover budget shortages. But that’s another discussion. What is in play and… Read more »
Mohamed Amer
Guest
Mohamed Amer
8 years 5 months ago

Think of it as a Darwinian business evolution. Retailers work hard to match assortments, pricing, visual, and service all packaged into a variety of formats designed to attract and keep customers coming back. Retailers adjust to changing CPG and shopper behaviors, as well as to rates of change/directions in the economy, gas prices, unemployment rates, healthy-living concerns, etc.

How these variable come together with how a retailer is organized internally and use of technology to run the business go a long way in determining a retailer’s success along the evolutionary path.

The only way to ensure you survive and thrive is not to get too enamored with your current success, try new initiatives, use data and technology, listen to customers, pay attention to shifts – because nothing ever stays the same.

John Karolefski
Guest
8 years 5 months ago

Dollar stores will continue to offer shoppers cheap consumables. I can’t imagine why they wouldn’t. The question is whether shoppers will continue to buy those products from dollar stores.

My hunch is that shoppers will, as long as median household income remains stagnant or declines, and “real” unemployment – that is, eliminating part-time jobs – remains in double digits.

It’s all about the economy.

Ben Ball
Guest
8 years 5 months ago

I signed on late this morning, primarily to endorse Tony O’s post. He not only has a great attitude, he has a great strategy.

One historical note, perhaps worth a “re-note” is that David Glass said Dollar Stores (or “extreme value retailers”) were the greatest threat looming to Walmart. As usual, he was right.

Okay, two historical notes then….

What part of “Hard Discounters” were we unable to see coming from Europe? Our greatest foible (and, yes, I used the personally inclusive pronoun on purpose) is the inability to look outside ourselves and our own little sphere of interaction.

Ed Dennis
Guest
Ed Dennis
8 years 5 months ago
I am amused that you ask the question “Is dollar general a dollar store?” Dollar General and Family Dollar are retailers with “Dollar” in their name. A dollar store is a store which sells everything for one dollar or less (Dollar Tree, $1 store, Dollar Bill, etc.). I think several factors are involved in all of the above concepts. First is our economy which is being held back by overly restrictive government, second is convenience. Dollar General and Family Dollar are in many markets that don’t have a Walmart or any large grocer. These two concepts have improved their grocery selection in most markets because they observed the growth of Walmart when Walmart added groceries (less than 15 years ago). As these retailers have many more locations than Walmart, they will be able to offer convenient shopping to far more consumers. We all see grocery advertisements every week; their main purpose is to convey low prices, sales, bargains, etc., and I expect these retailers to continue to follow suite. Their primary effect will be on… Read more »
Li McClelland
Guest
Li McClelland
8 years 5 months ago

Tony O., thanks for sharing your first person experience in directly competing with a dollar store. Hang in there!

The much smaller retail footprint (therefore a quicker in-and-out shopping experience for harried shoppers), coupled with their focus on household staples, food basics, and price, make “The Dollars” compelling to many types of customers. The mammoth football field size Targets, Walmarts and warehouse clubs should be very afraid.

Eric Chester
Guest
Eric Chester
8 years 5 months ago

For retailers that compete on price, the commandment is “he who hath the lowest price wins.” So as they say, don’t hate the playa’ (i.e. Dollar General), hate the game.

The objective then would be to compete on more than price alone (e.g. service, selection, convenience). If you can’t offer anything special other than price, you will only be able to retain customers as long as a competitor doesn’t offer a lower price.

Risky strategy with a low payoff and zero loyalty.

Jerome Schindler
Guest
8 years 5 months ago

There is a Dollar General right up the block from where I live. Overall, I am not impressed with their offerings or their prices – with one exception – their greeting cards that are good quality and 70% less than elsewhere.

Lee Kent
Guest
8 years 5 months ago

Dollar stores are hot hot hot, but for the life of me, sometimes I just don’t get it. We think just because it’s a dollar, it’s a good buy. I picked up a dollar can of shaving cream on my last visit to the dollar store. Wow, a dollar, same size as I usually buy. Who cares for a dollar, right? Wrong! It was terrible and didn’t last very long.

Now don’t get me wrong, they do have some brand names and good value. But, I’m just wonderin’ if the margins are in the branded goods or the fake offs that we buy just ’cause we’re there and just ’cause they’re only a dollar? Hmmmm

This is what other grocers need to be thinking about.

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