Where Retail Isnt Struggling While many retail chains

Where Retail Isn’t Struggling Ø While many retail chains experience sluggish sales, plan to close more stores and have no competitive strategy for the Amazon onslaught, dollar stores have increased their presence, growing from 6, 000 stores during 2010 to 29, 852 at the end of 2015. Ø In addition, total sales for the category during the same period have increased from $30. 4 billion to $45. 3 billion and outperformed the department store category (NAICS 4521) and warehouse clubs and superstores (NAICS 45291) during the last 2 quarters. Ø Job growth, minimum-wage increases in many states and significantly lower gasoline prices has put more money in the pockets of lower-income consumers who are dollar stores’ core customers and, in turn, generated more revenues for this sector.

Two at the Top Ø For its fiscal Q 1 2016 (ending April 29), Dollar General reported $5. 3 billion in sales, with a 2. 2% increase in same-store sales, as traffic and average basket size also increased. Consumables increased 7. 6% and accounted for $4 billion in sales. Ø Comparable-stores sales during Dollar Tree’s fiscal Q 4 2015 (ending Jan. 30) increased 1. 7% while total sales were $5. 4 billion, an increase of 116. 7%, compared to Q 4 2014; however, the large increase is primarily attributable to its acquisition of Family Dollar. Ø By comparison, the next largest retailer in this category, Big Lots, reported fiscal Q 1 2016 sales of $1. 31 billion, based on a 3. 0% increase in comparable store sales for stores opened at least 15 months.

Growth Grab Ø Dollar Tree’s yearlong plan to acquire Family Dollar was finally approved and took effect on July 6, 2015, and for $8. 5 billion. The acquisition put Dollar Tree at the top of the heap with almost 14, 000 stores, compared to Dollar General’s almost 12, 000 locations. Ø Sycamore Partners, a New York-based private-equity firm, purchased 330 of the former Family Dollar stores and will become Dollar Express stores during the next few years. Ø Dollar General is responding to Dollar Tree’s acquisition of Family Dollar with plans to open 900 new stores during 2016, following the addition of 730 during 2015. Of those new 2016 stores, 80 will be its smaller-footprint stores for urban and rural areas.

Leveraging a Location Strategy Against Wal-Mart Ø With smaller store footprints, dollar stores (Dollar General and Dollar Tree, specifically) are able to locate in crowded urban and sparse rural areas while Wal. Mart needs a much bigger retail property, forcing customers to travel greater distances. Ø Dollar stores don’t require as many employees as bigbox stores, often just someone to unload a truck and a manager. In addition, the average dollar-store purchase of $10 to $11 is little threatened by ecommerce, and Amazon, specifically. Ø Although Wal-Mart may not agree, industry analysts attribute the planned closing of 154 Wal-Mart stores during 2016, 102 of which are its Express stores and 23 its Neighborhood Market stores, to the increasing competitive advantages of dollar stores.

The Surprising Diversity of Dollar Store Shoppers Ø The dollar store target audience is more complex than imagined. According to Hartman Group research, “In any given month, 41% of American shoppers shop at both a natural/specialty retailer and either a superstore or dollar store. ” Ø Dollar General reported during May 2016 that it is consciously targeting more Millennial shoppers by offering more fresh fruits and vegetables, expanding its health & beauty department and increasing its assortment of stationary and party goods. Ø Dollar General said most of its Millennial shoppers are women, which are approximately 12% of its entire consumer audience, but represents 24% of total sales. Millennial women shop an average of three times per month.

Advertising Strategies Ø Dollar stores can promote themed bundles of products in their advertising, with coupons and in-store POP: Working Mothers’ Survival Kit, Health & Beauty Basics, Fresh & Healthy Food Combos, Household Helpers, etc. Ø To attract more Millennial women, consider a promotion that provides a special discount, coupon or other incentive for each extra time they shop during a month beyond the three-time average. Ø With 40% of Americans shopping at both a natural/specialty retailer and dollar store every month, co-promote with a natural/specialty retailer. With a qualifying purchase, each stores’ customers receive an exclusive coupon for the other store.

New Media Strategies Ø Dollar stores should post a quarterly survey on social media or via email campaigns asking consumers what other types of fresh fruit, vegetables and similar food items they would like see added to the store’s selection. Ø To increase their engagement with Millennial women, dollar stores must have a mobile channel presence that includes, for example, visuals of fresh food offerings with accompanying recipes as well as utilizing mobile coupons. Ø Social media content in story form generates considerably interest. Create mini-case studies of a few regular customers, asking why they shop at a dollar store, savings examples compared to other stores and photos/videos of them using purchases in their lives.