Dollar Stores 1/20/2012
It’s like the first time your little brother hits your famous whoop-di-doozer pitch over the fence in whiffle ball—you realize that everyone grows up, and you’re going to have to take him seriously (and get a new pitch). Ladies and Gentlemen, I give you the little brother: Dollar Stores.
For decades, dollar stores have been operating in the shadows, serving a particular customer base with particular products, while larger retailers jockeyed with one another for market share. Just like your little brother, these dollar stores are no longer smaller than you (the largest retail chain in the US is Dollar General with over 9K stores) and can no longer use your hand-me-downs (P & G is making sizes fit for dollar store shelves, instead of delivering overstock and closeout).
Like any older sibling would, you downplay the success—the wind caught that one, or in this case, the economy gave you a boost. Well, that’s all fine and true, but they still got a hit—and with plans to double store count (Dollar General) and net sales growth reaching 12% vs. last year (Dollar Tree), dollar stores are confident that they can continue to do it.
While these chains “grow-up” their operations (adding frozen food, quality and name brand items for more than $1, and stocking trip-initiators), consumers are capitalizing on their quality and convenience. Larger retailers are now faced with an age-old family dynamic shift—they can either adapt to this new competition or watch little brother circle the bases.
1. Have you analyzed the Dollar channel’s effect on your business? Are they eating away at your customer base?
2. Do you understand how your customers use you and dollar stores? Is there an opportunity to keep that business (product/trip focus)?
3. Can you identify points of your business vulnerable to the Dollar channel? How can you shore up those gaps?
