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Dollar Stores Consuming Greater Share of Food Market

December 7, 2012

It's been clear for years that the path to success for dollar chains involved opening more and larger stores as well as expanding inventories of food and beverages. The game plan has worked as Dollar General, Family Dollar, Dollar Tree and others have helped the channel grow share of the consumables market.

When times have been hard, it's been a given that consumers would seek out the channel to stretch dollars. But, even as the economy has begun to recover, dollar stores continue to pick up share from supermarkets and mass merchandisers.

A 2011 RetailWire poll found that 57 percent believed an economic rebound would mean much bigger (10 percent) or somewhat bigger (47 percent) sales for dollar stores. Much of this was due to the position that the chains have staked out in shelf stable, refrigerated and frozen foods.

Family Dollar, the number two dollar store chain, announced earlier this week that it has hired former Delhaize America executive Tammy DeBoer as its senior vice president - food.

"Providing customers with a compelling food assortment is key to driving trips and an important initiative for Family Dollar," said Paul White, executive vice president, chief merchandising officer for the chain. "Tammy's proven track record in the food industry and her strategic leadership will help drive further enhancements to our assortment and help us increase customer loyalty as we work to continue to expand our market share."

Discussion Questions:

Do you expect the competitive threat posed by dollar stores to other food retailers to increase, decrease or remain the same over the next five years? Do national or private brands represent the biggest opportunity for dollar stores to differentiate and gain share of food and beverages?

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:

Do you expect the competitive threat posed by dollar stores to other food retailers to increase, decrease or remain the same over the next five years?


I am surprised at the degree to which an atypical target like me (no pun intended) finds myself stopping by the dollar store for certain purchases. If I need laundry detergent, or other specific products, I know I can stop in, get a brand I like (generally), and get in and out quickly.

It's convenience in the truest sense of the word, since I also know I am getting a good price.

Dollar Stores are going to continue nipping around the edges of supermarkets, mass merchants and other retailers. It's just easy.

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Paula Rosenblum, Managing Partner, RSR Research

Dollar stores have become an inexpensive convenience option for consumers. As such, if they can consistently offer quality fresh produce and other products, consumers will continue to incorporate them into their shopping plans.

It's easier to do a quick trip to a dollar store than to visit a traditional grocer or mass merchant. And dollar stores, due to their smaller size, are frequently located closer to consumers, saving time—a most valuable commodity.

The stigma of dollar stores carrying seconds and almost over the hill produce is gone.

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Max Goldberg, President, Max Goldberg & Associates

This reminds me of the movie "Sand Pebbles" where I first heard the phase "death by a thousand cuts." As Paula has indicated, once customers use a dollar store they find it a convenient way to grab a few items. The impact on supermarkets and other large retailers is that they miss a few sales and an opportunity to sell someone more that they came in for.

The impact on c-stores is far greater. Dollar stores are now getting into selling beer and cigarettes—two key categories for c-stores. Thankfully for the c-store industry, they have stayed away from fuel.

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Steve Montgomery, President, b2b Solutions, LLC

The threat of dollar stores will put increased pressure on other food retailers as the concept of value diminishes and the concept of gaining advantage proliferates.

Whoever can offer dollar stores the most unique products - whether brands or private label - will be the most valuable to differentiate dollar stores. That would require a new supply paradigm but look to what Trader Joe's has accomplished.

Gene Hoffman, President/CEO, Corporate Strategies International

I expect the pressure to increase from dollar stores.

Not all dollar stores or discounters will follow the same path on private or national brands. I expect to see different chains find success with both these options, and I expect manufacturers to continue to adapt their strategies to accommodate these shifts.

Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

Unfortunately food sold at dollar stores is often heavily processed and generally consists of sodium, sugar and fat which foster obesity and high blood pressure. I hope the dollar-store industry offers its customers fresh and healthy options (as well as affordable, which fruits and vegetables usually are) as it develops its food business. Food for thoughts....

Fabien Tiburce, CEO, Compliantia, Retail Audit & Task Management Software

I have a Dollar Store that shares my wall right next to me, which I fought with my landlord about putting them there about 10 years ago. (He couldn't care less). This particular store has expanded grocery about 500% and has cost me a ton of money in lost grocery sales, and (I hate to keep using this phrase) perception of value. They have everything you could imagine, and people flock there like zombies.

So what is someone like me doing about it?

Less SKUs in grocery, and pound the perishables to the point where over 50% of my mix is meat, deli, and bakery. There is no way to compete with them, as they use there national leverage to kill any independent on key everyday items, like pop, chips, milk, bread, and private label canned goods. I threw Pepsi and Coke out of my store about 10 years ago due to this problem, as I was being charged .28 unit wholesale more on 2 liter Pepsi, than they were retailing it at. I use their traffic to bring customers in my store, as the meat sales we run create interest from the shoppers next door.

The level playing field looks like the Tower of Pizza, and until we recognize the fact, that we need to get better at what we do, trouble lurks ahead.

Dollar stores are building new stores like crazy all over the place and before you know it, there will be one in close proximity to all of us in 3-5 years. Get ready to have fun folks, and start promoting the perishables before they arrive.

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

I'm just not buying it—literally and figuratively. I'm apparently in the minority in thinking this is a bubble that will burst in part because FDO and DG are equally opening stores at such a manic velocity throughout the country.

What's interesting to me is that Walmart struggled for years—and many would argue continues to struggle—with the stigma thing versus Target/Costco. But apparently, people think there's less of a stigma or less of an impact from stigma with the dollar stores. The stores serve a wide customer base, but I don't see significant long term growth of that base like some do.

I'm still waiting on someone to come out with a study researching crime/burglaries in correlation with dollar store openings/development. I'm no loss prevention or security expert, but I know many examples where these stores have become prime targets for burglary (at some locations more than others.) If that's part of the "customer experience," that too will impact long term success for the—count them—2,225 *new* stores that FDO/DG will have opened in just 2 yrs time. Bubble....


I do expect that Dollar Stores (and Discount Retailers like Aldi) will continue to gain market share at the expense of traditional grocers and mass merchants.

Dollar Stores are convenient (they are numerous, smaller in size), carry brands and private label products and are priced right.

Convenience and price often trumps assortment and even if customers who shop there are shopping for 'fill in' between major shopping trips to their primary provider (grocery or mass), this still amounts to a significant revenue source.

Charles P. Walsh, President, OmniQuest Resources, Inc

I too have concerns about the "bubble" effect of opening so many new stores in a short period of time. But the quick in and out makes the trip so very tolerable for so many time-starved shoppers, especially when they know (or think they know) they can count on prices being low.

In my area, the stores aren't so new and they aren't really very pleasant to be in. So, despite the shorter time I could spend shopping, I just don't.

I find that Target's prices on food staples are usually very competitive and I use a great Kroger for organic staples, which they've price-corrected much lower than they were a year ago or so.

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Anne Howe, Principal, Anne Howe Associates

The threat posed by dollar stores will continue to grow. Given the high growth rate of dollar stores in convenient locations coupled with the continued expansion of food offerings, this is guaranteed to continue to impact other food retailers. Center store is the most vulnerable but other areas of the store may also be impacted as dollar stores continue to focus on other products.

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Brian Numainville, Principal, The Retail Feedback Group

One thing that annoys me when doing site location research is finding so many new competitors. Just when I think I found them all, I find a Dollar General Market. Dollar General will put a store anywhere there is a highway or cross roads. Maybe they only do $20,000 a week. But when your trade area has 20 of them, they add up.

The opportunities are endless for dollar stores. The challenge is to make them compelling. I don't see them being able to sell the national brands for much less than Walmart, Target or other price operators. If they can get a good rep on their private brands like Aldi, Trader Joe's, Wegmans, and HEB, they could pose a big threat. But so far they are a long way from that, and they will have to do more than hire an exec from a sterile chain.

David Livingston, Principal, DJL Research

I can safely say I'm in the proud group of avoiders, as I've only been in a dollar store exactly one time...and they didn't have what I was looking for (which was a men's room); but my impression was (otherwise) favorable. The store was brand-spanking new and well stocked, and there were few customers to confirm my fears of what kind of people might shop there.

So based on this highly scientific survey, I'll say that, yes, I think they're here to stay and will continue taking market share from anyone else (c-stores, conventional grocers, discounters) who is trying to sell primarily on price. Whether that will grow from a thousand nibbles to Jaws type gulps, or not, I guess we'll have to wait and see.


I expect dollar stores to increase their market share in 2013. Once a consumer likes a store and their product line, they are more likely to continue to buy from that store as the economy recovers. I think private brands are the way to go with this chain.

H. Douglas Walker, President, Northampton County Seed Co. Inc.

I find a couple of interesting things at play here, especially with Mr. Orlando's comments as a partial backdrop. A major CPG can only sell so much of a product in a geographic area, right? How much laundry detergent, toothpaste, etc. can one town buy? Now in a major metropolitan area like DC, this is a little more complicated. However, in a small town with one or two grocers, one or two c-stores and the now present Dollar Store who gets the sale? Aren't we just back to the old channel blurring/class of trade issues? Large national chain gets cheaper price negotiated than the independent gets from their wholesaler?

As Mr. Orlando did—sometimes the only choice is toss them out the door, or just not carry that type of product. Is the shopping experience getting more fragmented in some areas?


A mix of brand and private label will be the order of the day from consumers who are attracted to the dollar store channel. Incomes are likely to remain below 2010 levels, jobs will be precious, and the consumer will be cautious as they re-enter the consumption world over the next 5 years.

The consumer, unlike the federal government, has gone through a good deal of deleveraging over the past 3 years. Lessons learned by consumers, not government, will keep those consumers comfortable with patterns of "high/low" consumption patterns. Even those who have the extra buck(s) in their pockets will make use of the splurge/skimp spending patterns.

This plays into the hands of dollar stores—they will be a stronger threat for food retailers, as they chip away with opportunity purchases and necessity items discounted to those found in grocery stores and even discount merchants.

Dollar stores in more consumer-challenged areas will fare better than stores in markets/states with healthier economies.

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Roger Saunders, Global Managing Director, Prosper Business Development

Dollar stores wil increase their share at the expense of C-stores and grocery. The combination of convenient shopping and price is compelling for quick trips, etc.

National brands in smaller packages are attractive to boomers, seniors and younger consumers as well. For many items—condiments, households, a smaller unit of a national brand is a good deal. Chains tend to offer deals on multiples and larger 'family" sizes, not what many shoppers are looking for because of small households, and limited storage as well as budget.

Private label may have to develop a following to establish quality benchmarks; it may offer opportunities for certain target shoppers, like Asian and Hispanics, younger consumers and others. Freedom to label appropriately and develop specific package formats will go a long way to reach these target groups.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

Dollar Stores need to invest in technology for e-commerce and loyalty management. If they lag behind other retailers in technology adoption, their advantage may erode. Restricting operations to a segment, like Food and Beverage, will help to customize business processes. Example: Better price optimization techniques can be used to manage perishability in supply chain and expiry.

Chandan Agarwala, Manager - Strategy and Research, iGATE Corporation

At PRS, we've been tracking these shopping trends, and just released the results from our second annual shopper survey focused on grocery buying. Our results indicate that although most shoppers (91%) purchased groceries in supermarkets in the past three months (in line with last year's 92%), mass merchandisers are a large competitive threat—although declining somewhat (73% purchase groceries there, down from 76% in 2011).

Not surprisingly, dollar stores are gaining momentum as the percentage of shoppers who buy groceries at dollar stores has increased, from 32 percent in 2011 to 35 percent in 2012.

As grocery offerings become available in different venues, will shoppers shift channels? Or will they continue to maintain allegiances to certain stores out of choice or habit? For now, it appears that shoppers associate different channels with different primary benefits:

  • Supermarkets offer superior selection
  • Mass merchandisers and dollar stores offer the best pricing
  • Drug and convenience stores offer the most convenience

Given shoppers' willingness to change brands to save money, switching to a new venue—such as dollar stores—might be more acceptable than it had been in the past. But time will tell whether dollar stores simply are to remain a category-focused supplement to other venues (for cleaning and personal products), or a replacement (including a destination for groceries).


Pressure from dollar stores on traditional grocery will continue to increase. What we need to remember is the dollar store format is not about having everything a consumer needs (large assortment and variety), but providing the best price on essential items. For example, they may carry the top two brands of tomato sauce, but you love the third or forth tier. As dollar stores expand into food, I don't see them focusing on variety; it's about price.

Private Label if done right can be a huge growth opportunity for dollar stores. They key is building a brand that consumers associate with value and quality, and not cheap and bland.

John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

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