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99 Cents Only Wants Spot on Rodeo Drive

October 18, 2012

While dollar store locations have spread far beyond lower-income communities, 99 Cents Only is causing a stir by seeking to open a flagship location on Rodeo Drive.

"Our best store by far is on Wilshire Blvd, two or three blocks from Beverly Hills. That store does incredible volume," 99 Cents Only CEO Eric Schiffer told the The Courier in Beverly Hills. "For many years our customers have been asking us to please open in Beverly Hills and what better spot than Rodeo Drive?"

Beverly Hills Planning Commission Vice Chair Brian Rosenstein called it a "wonderful publicity stunt," but didn't think a landlord with tenants like Chanel and Louis Vuitton would support a dollar store.

"That doesn't mean 99 Cents Only Store isn't appropriate for Beverly Hills, but Rodeo Drive is known for it's luxury and elegance and I don't quite think a 99 Cent store blends in there," Mr. Rosenstein told The Courier.

Speaking to the Los Angeles Times, Mr. Schiffer said a recently-opened location on Santa Barbara's high-end State Street is also thriving. Affluent consumers likewise enjoy the thrill of steep savings on name brand products and organic produce the 300-unit chain attains from overstocks.

"We buy name brands like Wolfgang Puck, we have Jamba Juice items, Toblerone candy bars," Mr. Schiffer told the LA Times. "Some customers don't recognize the gourmet items, but someone who values and knows the brand gets excited because they are getting a $4 item for less."

While the major chain dollar stores such as Dollar General, Dollar Tree and Family Dollar are finding ample room to aggressively expand, local community protests of pending dollar store openings are still common, often centered on the impact on property values.

But a July report from Consumer Reports based on a survey of 1,500 women found dollar chains attracting wide range of customers — including those making more than $75,000 a year — with their "convenient and fun" experience. Not only are dollar stores better organized and designed to help shoppers get in-and-out more quickly than in the past, they're carrying more national brands and groceries. The "fun" part comes because they're "a bit like being on a treasure hunt — they carry a wide and ever-changing stock of goodies."

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Discussion Questions:

Is the stigma around dollar stores lessening? What's driving dollar stores' apparent appeal to affluent consumers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What's the likelihood that dollar stores will be open and succeed in more and more upscale areas in the years ahead?

Comments:

People want cheap stuff and it is a trend that will never die. If they can save money on food and household stuff, than maybe they can afford a vacation for themselves, or invest some savings in the market or college fund. We as independents must work with our suppliers to fight against our center-store losses, and for those who haven't dealt with these stores, don't worry, they'll be in your back yard very soon. Good Luck!

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Tony Orlando, Owner, Tony O's Supermarket & Catering

The appeal of stores like 99 Cents Only is the THRILL of saving. It is pure THRILL shopping without major pain to the wallet.

I have watched this with the growth of garage sales in the Midwest and the total elimination of the true antique store (which my family owned for many years). Garage sales are THRILL shopping, but the deals are slowly disappearing. Antiques were a way to get a piece of the past and to find "good deals." It was pure THRILL shopping. But the days of THRILL have gone modern thanks to the internet and online price books that make the price of some antiques outrageous!

So 99 Cents Only is the MODERN THRILL. I love the stores and do find good deals while catching a THRILL.

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

The stigma is lessening. The appeal of dollar stores is the same with the affluent and less than affluent. Smart shoppers want value. If they can afford the rent at Rodeo Drive and they can get approval, why not? McDonald's is on the Las Vegas strip in at least two places. So why not a dollar store on Rodeo Drive? Can't wait to see the tabloid pics of celebs getting out of their limo to hit the dollar store.

David Livingston, Principal, DJL Research

This reminds me of our thoughts when we first learned companies like The Container Store and other retailers were planning to open in Manhattan. Look at how successful that was. Yes, I know those companies were not a "dollar store," but why spend $5.00 for a birthday card when you can get almost the same card for $1.00? Even Beverly Hills shoppers can see values through their tinted Gucchis.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I didn't know there was a stigma around dollar stores. I suppose it was fostered by the same people who would "never" use a coupon. Really? If affluent people don't like a bargain, why would American Express offer free amenities to its Platinum members that use American Express Travel for reservations?

As mentioned in the article, the treasure hunt aspect of dollar stores is a customer experience that can't be matched. I must admit I try to find that feeling among Whole Foods' sales, but that's because I always anticipate retail adventures. And sometimes I find them.

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Joan Treistman, President, The Treistman Group LLC

The stigma is ego, not financially based. Everyone likes getting something for less whether it is a Gucci bag or a gallon of gas. However, there are those who are proud of their ability to ferret out a higher-end bargain, who would definitely not want to be seen shopping in a dollar store, and there are those who simply see them as a place where they can get a deal and are more than willing to say I saved X at a dollar store buying this item.

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Steve Montgomery, President, b2b Solutions, LLC

Stigmas get old, great deals never do!

Everyone loves a deal! Walmart experienced similar coverage during the peak of their expansion years where pundits frequently debated Walmart's ability to shake their discount image and attract high-income shoppers.

The answer may be in the Dollar Stores have a convenience factor advantage (plentiful locations, small in size, easy to shop and filled with good deals) which provides affluent customers the opportunity to get in and out with some great deals.

Charles P. Walsh, President, OmniQuest Resources, Inc

I love this story. I am in Beverly Hills this morning and love the delicious irony here. I had dinner with a bunch of CIOs last night who noted that it's now chic to save money. The question, though, is will there be adequate parking for Bentleys and Lamborghinis outside?

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Cathy Hotka, Principal, Cathy Hotka & Associates

Everyone likes a deal -- it's as simple as that. It doesn't matter whether you put that 99 Cents Only store item in a $1000 Louis Vuitton carry all.

I didn't know there was a stigma of a dollar store. How many customers walk through a Walmart each day?

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

After the economic status of the past few years, the attitude towards dollar stores has definitely changed. And affluent or non-affluent -- who doesn't like a bargain? These stores definitely have a place in the market, but my thought about a Rodeo Drive location would be that it cheapens the area; the shoppers of Rodeo Drive are not looking for bargains!

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Zel Bianco, President, founder and CEO, Interactive Edge

If you would have told me 10 years ago that there would be multiple second hand stores on Newbury Street in Boston, I would have told you you're crazy. I watch people go from a luxury brand store right to the second-hand store. Put a dollar store there and people would hit it next.

I don't think there is a stigma at all. You just have to wonder if a dollar store could be profitable with the extremely high rents. Then again, how much has all the publicity already been worth?

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Doug Fleener, President and Managing Partner, Dynamic Experiences Group

I think it's the thrill of the deal PLUS the convenience of getting a brand name without waiting in a long line. I've found myself stopping by a local dollar store myself lately. I honestly didn't care so much about absolute price. I cared that I could get in and out really quickly.

This is in direct opposition to a big-box mass merchant like Walmart, which may be cheaper or not, but is incredibly inconvenient.

So yes, it's price, but I think convenience and brand confidence beats that every time.

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Paula Rosenblum, Managing Partner, RSR Research

I don't think there is, or ever was a stigma attached to dollar stores; there is/was a stigma attached to being an area that has ONLY dollar stores (and their brethren). I just got back from a vacation in (state not identified to protect the impoverished) where I saw little else but discount/thrift stores and burglar bars...did it leave a negative impression? You bet!

'notcom'

I think the stigma of dollar stores are lessening, especially if they get the store decor appropriate for the neighborhood. In today's world, the thrill of "getting a deal" and conspicuous frugality is in the media and mass culture. At the end of the day, the success of a dollar store on Rodeo Drive will be dependent on whether they can generate enough revenue to pay the extremely high rent there.

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Kenneth Leung, Director of Enterprise Industry Marketing, Avaya

I think the idea of a dollar store on Rodeo Drive is brilliant. The first time someone sees a celebrity in the store, the rest of Hollywood, Beverly Hills and the others living the "lifestyles of the rich and famous" will find it in vogue to be thrifty. And, I bet it generates some great PR. Seems it already has.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

I must say I enjoy the cheerful subversiveness of Mr. Schiffer's proposal to put a 99 Cents Only store on Rodeo Drive.

Of course the math is not likely to work. Local rents are prohibitive and I doubt such a store can pack in enough transactions to get past base cost to profitability. Then there are the landlord's covenants with other tenants to consider....

But I take a certain pleasure in visualizing a 99 Carats Only store in 90210, with velvet ropes out front, valet parking, and custom shopping bags. Chanel No.5 bottles on cut-case display, and Hermes scarves in a dump bin in the power alley....

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James Tenser, Principal, VSN Strategies

Jamie is totally right. Dollar is a mainstream type of retail channel now because all shoppers seek value for very different reasons. At worse The Rodeo Drive move is a brilliant PR move. This of the media placements that can come from the latest starlet bopping in to bargain hunt. More likely it is a great trial location for tourists and maybe locals.

There is a slim shot the store can make money. More likely it will get people who wouldn't consider 99 Cents Only and change perceptions so more of us know the value proposition is fun and worth a few minutes of our time.

Alison Chaltas, EVP, GfK

What drives dollar stores' appeal to anybody? They are FUN! The 'treasure hunt' aspect makes them worth the time to browse through.

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Jerry Gelsomino, Principal, FutureBest

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