Dollar Stores Face Challenges
By George Anderson
A new study by Retail Forward, Dollar Stores and Other Small Format Value Retailers, says the dollar store channel will continue to grow over the next several years but not anywhere near the clip achieved in the past.
According to the report, small format value retailing, including dollar stores, grew from a $31 billion business five years ago to $42 billion today. During the same period, the top 10 chains went from a 44 percent share of the market to nearly two-thirds of all goods sold.
Aggressive new store expansion by the leading players remains the primary growth driver for this sector,” said Nick McCoy, senior consultant with Retail Forward and co-author of the report in a released statement.
Dollar stores and other small boxes focused on price are finding it more difficult to achieve the type of growth realized in the past. Retail Forward projects sales in the small box value-retailing segment will grow at a rate of 5.4 percent a year through 2009.
Mr. McCoy said higher fuel costs and economic hardships faced by the core consumer of value retailers is having an impact on the channel’s performance. “As these core shoppers’ budgets get stretched to the limit, we’re seeing a reduction in the number of shopping trips and a postponement of discretionary purchases,” he said.
There is a potential silver lining for the channel in this scenario, said Mr. McCoy. “These same economic pressures may lead to more consumers trying the format because everyone loves a bargain and American shoppers increasingly are value-oriented shoppers.”
To attract new consumers and increase the frequency of shopping visits by current customers, Mr. McCoy and Retail Forward sees a continuing and growing emphasis on food. He also believes that dollar stores and other small box value retailers will place greater emphasis on retailer controlled labels, as well.
Moderator’s Comment: What do you see as the challenges and opportunities for dollar stores and other small boxes with a value positioning?
– George Anderson – Moderator