Dollar Tree Buys Way Into Canada
Dollar Tree is the third largest dollar store chain in the
U.S. behind Dollar General and Family Dollar, but it is about to become the
first in the channel to operate outside the country after agreeing to buy the
Dollar Giant chain in Canada.
Dollar Giant, which is based in Vancouver, British
Columbia, is the third largest dollar store chain in the country. Having 85
stores in Canada, the chain trails behind Dollarama (600 stores) and Your Dollar
Store With More (140 stores). The chain, which operates locations in Alberta,
British Columbia, Ontario and Saskatchewan, sells a wide variety of consumables,
general merchandise and seasonal goods priced $1.25 (CAD) or less. Stores average
about 9,000 square feet.
"I am excited about the opportunity to expand our presence into Canada," said
Bob Sasser, President and CEO of Dollar Tree, in a statement. "Dollar
Giant is an excellent fit for us. This acquisition will enable us to further
leverage our resources and infrastructure to offer more value to more customers.
It provides Dollar Tree with an outstanding platform for significant, profitable
growth in the Canadian market.
"I am particularly impressed with the people of Dollar Giant. The
company’s management and associates have extensive retail experience and the
proven ability to build and expand an effective, profitable business," Mr.
Sasser said. "This team will remain in place. They are one of the key
reasons for my confidence about our future success in Canada."
Discussion Questions: Will Dollar Tree’s acquisition of Dollar Giant
make it more competitive going up against larger chains? What was your reaction
to Dollar Tree’s announcement it planned to leave Dollar Giant’s executive
team in place to continue operating the chain?
It seems an increasing number of US retailers are eying Canada for expansion. Many of them, such as Target and Kohl’s (and of course Dollar Tree), depend on a lower price point as a major part of their value proposition. With Canada undergoing the same basic economic difficulty as the rest of the world, this could be a good way for value-priced retailers to expand without risking over-saturation in the crowded US market.
Canada is and always will be a good way for a the typical U.S. retail brand to tag on an extra 10-15 percent in sales on stronger than average margins. As long as the company accounts properly for the additional logistical, packaging, HR Admin and legal costs, the Canadian business can add some profit and improve overall buying power.
This is a good way for Dollar Tree to gain entrance into Canada, but it may be an expensive marketing effort. There are only 85 stores, and Canada has fewer consumers than any of the large metro areas like Los Angeles, Chicago, etc. The real key here is would Dollar Tree have been better off putting 85 stores in these large metro areas vs. Canada…hmmmm….
Dollar Tree did a wise thing purchasing Dollar Giant. While 85 locations will not make them anything more than a new name on the street, it does give them an entree to move faster into developing more opportunities and acquisitions.
It is probably wise to leave as much of the existing management in place, minus the duplications that can be assimilated, such as accounting, etc. These execs know the market and will enable Dollar Tree to be successful. The only surprise to me is the low number of locations in this chain. I would have thought there were more.