The Return of the Dollar Store?

Downturn in the economy hasn't slowed discounters' growth plans

INDIANAPOLIS -- As mainline retailers throttle down on store openings, dollar stores continue to expand, catering to the growing numbers of shoppers looking to save money on everything from tools to toys to bath supplies, reported The Indianapolis Star. "Dollar stores are one of the few stores right now that are expanding. They typically do well when the economy is not going well," Mark Perlstein, a principal at Sitehawk Retail Real Estate Group in Indianapolis told the newspaper.

All three of the large, publicly traded dollar store chains have ambitious expansion [image-nocss] plans on their books, said the report. Goodlettsville, Tenn.-based Dollar General is moving ahead with plans to build 200 new stores and remodel another 400 nationwide in 2008. Matthews, N.C.-based Family Dollar is planning 200 store openings in 2009. It is also investing in store renovations as it adds refrigerated foods to its offerings. And Chesapeake, Va.-based Dollar Tree is in expansion mode, adding 201 new stores so far this year nationwide.

Dollar stores aim to undersell mainstream retailers by stocking leftovers, low-priced house brands, time-dated products at the end of their shelf life or surplus goods or overruns acquired at sharply discounted wholesale prices. Even as they thrive as "retailers of last resort," dollar stores are upgrading their image by standardizing their merchandise mix and spiffing up their stores.

"We want our stores to be consistent," Tawn Earnest, spokesperson for Dollar General, which is remodeling stores to look more alike and stock more of the same items, told the paper. "If you find Head & Shoulders at our store one week, you'll find it every week," she said.

Perlstein said dollar store operators tend to prefer spaces of 6,000 to 12,000 square feet near big-box retailers, to feed off competitors' customers. "They like to be near Wal-Mart, near Target, being where the traffic-generators are," he told the paper.

The typical Dollar General store draws customers from a five-mile radius and an average shopping trip lasts just 10 minutes, Earnest said. "People are short on time, they are short on money."

Family Dollar not only is adding food coolers to sell consumer staples, such as milk, eggs, cheese and lunch meats, but in the past few years, more of its stores have switched from a cash-only policy to accepting food stamps and credit and debit cards, spokesperson Josh S. Braverman told the paper.

Perlstein said he sees dollar stores increasingly moving into smaller towns, while being one of few retailers spending money on store expansions during the current economic downturn. "Retailers right now, there are so many that have halted expansions entirely. Dollar stores have not been affected at all," he said.

At Dollar Tree, where everything still sells for $1 or less, unlike other dollar stores that often sell items for more than a buck, refrigerated foods are now offered in a third of its 3,572 stores. Sales of food and other consumable goods-namely, cleaning supplies and health- and beauty-care items-have risen to 42% of sales this year, compared with 39% a year ago, spokesperson Timothy Reid told the paper. "We are relevant to the times. We really are," he added.