Monday, September 22, 2008

Dollar Days and Ninety Nine Cent Nights

...But Not in Texas

Dollar Stores are a hot news item these days, as the discount market grows its share of spending from budget-conscious consumer. So while Walmart and its ilk are doing reasonably well given the overall trend towards buying less, the Dollar and 99 Cent Stores are expected to increase sales thanks to shoppers who want to stretch their paychecks a bit more. Despite the sense that people who shop at discount dollar stores are struggling financially, the numbers indicate that these stores (along with big-box stores like Walmart) are gaining popularity with more affluent shoppers too. To wit, 99 Cent Store CEO Eric Schiffer claims their most profitable store is on Wilshire Boulevard in Los Angeles. Even so, for the dollar stores the current economic climate is a mixed bag (not unlike those surprise goodie bags they have at the end of the toy aisle). Some are doing well – both Dollar Tree and Family Dollar report increases in sales and profits in August:

Higher household costs have sent shoppers into the nation's largest everything's-a-dollar chain looking for better prices on food, cleaning supplies and health and beauty products, said Bob Sasser, Dollar Tree's chief executive…While in stores to buy those needed items, customers also bought more party and summer-decor goods and graduation gifts, Sasser said.
But others like the 99 Cent Store are having trouble deciding whether they can really maintain their promise to keep everything in the store at 99 cents. One of the only “true” dollar stores left, the company blamed inflation and rising food and energy prices for its new prices. It will also have more variable pricing under the 99 cent range (previously, all items were either 99 cents or two for 99 cents). The increase means the maximum price in the stores will still fall below a dollar while helping the company offset some of the higher costs of doing business. And lest you think these discounts are being purchased through cheap overseas labor, CEO Shiffer explains,
The vast majority of everything we buy is made in the U.S.A. That surprises a lot of people. We sell mostly food, cleaning products, which are water-based and very heavy to ship. Health and beauty care products — again, water-based, so the shampoos and everything come from here. Our imports are probably about 15 percent. I would say the United States is by far the lion’s share.”
Some chains can’t quite hold on to the promise of the name: Canadian store, Dollarama will introduce three new price levels - $1.25, $1.50 and $2 - though it says the majority of items will still sell for $1.
"After 16 years at a dollar, we've found in the last few years sourcing dollar products has become a little more difficult," Dollarama chief executive officer Larry Rossy said in a rare interview. "Meanwhile, during our recent buying trips [to Asia] we were consistently offered 'wow' items at the $1.50 to $2 price point."
Although jokes and skepticism abound about the quality and freshness of food at these deep discounters (there are websites, programs, and cookbooks on cooking from the dollar store), the chains are actually adding more refrigerator cases, stocking more brand names, and selling food more than any other item.

People buy more than “dollar” items at these stores – witness the increase in dollar bargain bins at supermarkets. Target strategically places a rotating selection of one and two dollar items right near the entrance (because you didn’t know you needed a pair of knee socks with dancing monkeys! And a set of four ornate chopsticks in a silk holder!) These items are sometimes $2 or $3, as is the case in other discount “dollar” stores. But if you want to stick to the real thing, the 99 Cent Store gives you the pleasure of spending a dollar (not less, since there’s no change for those 99 cent items) unless you live in Texas, where all 40 stores are being closed for lack of profitability. This just means you have to hope in the car and head over to California, Arizona, and Nevada, where there are 230 stores that contribute approximately 90% of the company's sales. Be sure to pick me up some of those monkey socks and antibacterial soap along the way!

1 comment:

ellie said...

As a new store owner, I just read Discovery-Based Retail (I recommend! www.discoverdbr.com), which helps retailers understand their "Slot of Success," or their niche. Certainly, the dollar stores have mastered the art of creating a niche in convenience, pricing, and product. For many "dollar" stores, it's really quite a successful formula - - I only wish I new how to apply those success to clothing boutique beyond understanding that in this economy, being hyper-niched isn't a bad thing!