As big retailers swoon, dollar stores enjoy boom
By Jeff Swiatek
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.
"Dollar stores are one of the few stores right now that are expanding. They
typically do well when the economy is not going well," said Mark Perlstein, a
principal at Sitehawk Retail Real Estate Group in Indianapolis.
All three of the large, publicly traded dollar store chains that operate in the
Indianapolis area have ambitious expansion plans on their books.
Dollar General is building two new stores in Indianapolis, as the
Tennessee-based discounter moves ahead with plans to build 200 new stores and
remodel another 400 nationwide in 2008. Dollar General has 303 stores in
Family Dollar is building a new Southside store, one of 200 store openings the
North Carolina-based chain plans in 2009. Family Dollar, which has 195 Indiana
stores, also is plowing money into store renovations as it adds refrigerated
foods to its offerings.
Dollar Tree is on an expansion tear as well, adding 201 new stores so far this
year nationwide. The Virginia-based chain hasn't announced any expansion plans
for the Indianapolis area, where it has 24 stores. Dollar Tree has 97 stores
overall in Indiana.
Known in the retail trade as "super discounters," 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," said Tawn Earnest, spokeswoman for Dollar
General, which is remodeling stores to look more alike and stock more of the
same items. "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,"
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," she said.
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, said spokesman Josh S. Braverman.
Perlstein, the retail broker, 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 percent of sales this year, compared with 39 percent a year
ago, said spokesman Timothy Reid.
"We are relevant to the times. We really are," he said.