Dollar Stores Recharging to Keep Sales Strong

Dollar stores look to retain affluent customers even as the economy improves by expanding their product lines and renovating stores.

March 22, 2011

DENVER - A feature earlier this week in the Denver Post highlighted the evolution of dollar stores, which have fared well these past few years as the economy weakened.

While traditionally targeting households with family incomes less than $40,000, dollar stores have recently begun attracting more affluent shoppers, who have sought ways to offset financial burdens resulting from job losses or stagnant wages. And to retain that new client segment, the stores have begun expanding their product lines and renovating stores.

Dollar Tree has retained its concept of selling items that cost no more than $1, though other stores now offer a larger selection at prices that range up to $20 for larger goods and small appliances.

A ShopperScape survey last year revealed that 73 percent of Americans would continue their recession-induced behavioral changes even as the economy improves.

Some of the success of the dollar store format is attributed to its smaller space than a grocery store ?" roughly one-fourth or less the total size. And along with lower inventories, that helps keep the stores?? operating costs low.

"We are a low-cost operation ?" that's one of the secrets of our success," said Kiley Rawlins, an executive at Matthews, N.C.-based Family Dollar. "We won't have the selection of toothpaste you'll see in a Kroger or Walmart or Target, but we'll have the most popular brands."

Retail consulting firm Willard Bishop recently released a report that predicted dollar stores would continue to grow at a rate of 5.4 percent at least through 2013. At the same time, the report predicted traditional supermarkets to grow at just 0.3 percent during the same period.

The top three largest dollar store players, Dollar General, Dollar Tree and Family Dollar, combine for some impressive stats:

  • Combined market capitalization of $23.2 billion
  • Combined sales over the past four quarters of $26.6 billion
  • Average total return to shareholders over the past year of 34.6 percent
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