Rebound Won’t Slow Down Dollar Store Growth
The theory that the Great Recession has changed American
consumers forever, creating a perpetually frugal shopping population almost
regardless of income level, is going to be put to the test as the economy continues
to rebound. Perhaps the greatest laboratory for this test will be the dollar
store channel, which has experienced rapid growth in recent years.
there are many who expect the channel to thrive. Laura Champine, a retail analyst
at Cowen & Co., is among those who see dollar stores growing
despite a rebound in luxury categories in recent months.
“We didn’t expect to be promoting the stocks of the discounters at this
stage of the recovery,” Ms. Champine told Time magazine. “This
reflects the high unemployment levels and a value-focused consumer. Usually,
we’d be recommending the growth-oriented retailers, not the bottom feeders.”
store chains are certainly bullish on their own prospects. Dollar General,
the nation’s largest chain in the channel, announced yesterday that it would
open 625 new stores this year including locations in three states, Connecticut,
Nevada and New Hampshire, where it has not previously had a presence. The company,
which also plans to remodel 550 other locations, expects to add 6,000 store-level
jobs in 2011 as it expands.
The chain has grown by increasing its emphasis
on everyday staples such as grocery items and household products.
which currently operates more than 9,000 stores, said in August it was looking
to add beer and wine to its product selection with a goal of selling the alcoholic
beverages in at least half the locations it operates. The chain sought to boost
toy sales in its stores over the recent holiday selling season by offering
a 10 percent discount on bulk toy purchases of $250 or more.
These strategies may have brought in higher income shoppers, but will they remain loyal to the channel?
“For the second year in a row, 95 percent of our trade-down customers are saying that, regardless of what happens to the economy, they’re going to continue to shop with us,” said Rick Dreiling, CEO/chairman of Dollar General Corp.
Competitors in the
dollar channel are also growing.
Family Dollar Stores, the second largest chain
in the channel with roughly 6,800 stores, saw comparable store sales grow 6.1
percent for the quarter ending August 28. Total sales were up eight percent
for the period.
Dollar Tree, with just over 4,000 stores, bought its way into
the Canadian market with the acquisition last year of Dollar Giant and its
Discussion Questions: Do you subscribe to the “new normal” theory
that says consumers have been permanently changed by the Great Recession?
What do you think of the prospects for dollar stores as the economy continues
- Dollar Stores: Getting More Bang From the Buck – Time
General to Open 625 New Stores and Create More Than 6,000 New Jobs in 2011
– Dollar General Corp./Business Wire
- Family Dollar Fourth Quarter Comparable Store Sales Increase 6.1% – Family
Dollar Stores, Inc./Business Wire