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Dollar Days: How Dollar Stores Are Growing in a Weak Economy

February 9, 2012 Comments off

Dollar Days: How Dollar Stores Are Growing in a Weak Economy (PDF)
Source: Colliers International

It’s the single lesson retailers took away from the recent recession: they’re dealing with a transformed consumer. The rapid evaporation of wealth, both real and perceived, has profoundly changed the way Americans shop, how they think about the buying experience, and how they define value.

As dollars migrate away from some discretionary spending, retailers’ mission to provide value has intensified competition in need-based product categories. Food is one of them. Traditional grocers, drive-up grocers, supercenters, organic markets, warehouse clubs, drugstores, and dollar stores now jostle each other in an extremely crowded food-at-home marketplace. Developers, owners, and investors have taken notice, realigning their growth strategies to embrace the lowerrisk prospects of either retailers or properties that derive significant profits from food sales.

Dollar stores have been one of the clear winners. Long known for value they provide with convenience positioning, edited assortments, and low prices, the four leading national chains have emerged recently as viable, rapidly expanding players in the niche food market. Unlike other retail categories with clear leaders and laggards, each dollar store chain is a strong operator. All four have remained bullish in their 2012 outlooks, reiterating earnings guidance and the scope of their real estate programs.

This white paper will explore the combined expansion programs of the four major chains with an eye toward the sustainability of their future growth. An aggressive suppliers’ rush into any category, even food, carries a risk of saturation, and historically newer entrants are more vulnerable when consumer sentiment changes. A combination of dollar stores’ real estate decisions, merchandising assortments, and deal structures, however, suggests their future will continue to be bright even as the overall retail market struggles to regain momentum.

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