Posted on: Sunday, July 27, 2003
Big retailers testing out dollar stores
| • | Parent of 99-cent concept opens 4th store on O'ahu |
By Lorrie Grant
USA Today
The growing appeal of "dollar" stores has begun to trouble even the most traditional retailers — enough that some are testing their own "dollar" sections.
Department and specialty store sales are down from last year through June, major supermarket growth is under 1 percent, and even mighty Wal-Mart is up just 2.9 percent. But Family Dollar chain sales are up 3.9 percent, and Dollar General's are up 4.2 percent.
In a slow economy, a big part of dollar stores' appeal, obviously, is price: Items are generally $1 or less, thanks to a low cost structure, limited-quantity purchases and the use of private- and off-label food and dry goods merchandise.
"Customers love extreme value," says Howard Davidowitz, chairman of retail consulting firm Davidowitz & Associates.
For deal-chasing consumers, another part of the appeal seems to be the thrill of the treasure hunt: While frugal shoppers get as much as they can for less, even the affluent love the intrigue — and always leave with something.
Among major retailers taking a look at the dollar format:
• Kroger, the nation's No. 1 supermarket chain, has dollar stores in two Houston markets. They carry some 15,000 items, from beauty goods to snacks and party supplies. "It gives another reason to shop at Kroger rather than go to our competition,," says spokesman Gary Rhodes.
• A&P and other supermarket units of the Great Atlantic & Pacific Tea Co. are testing the dollar concept, though they would not comment on it.
• Wal-Mart, the biggest retailer in the world, is testing the dollar-goods concept in 17 stores. Initial reaction: "People get very curious to see what they can buy for a dollar," spokesman Tom Williams says. Dollar stores used to be a retailing fringe. But chains led by Dollar General, Family Dollar Stores, Dollar Tree Stores and 99 Cents Only Stores have consolidated it, squeezing out small players and introducing modern retailing techniques.
"The mom-and-pop discounters have been marginalized and a lot of share taken away in favor of the dollar store chains," says retail analyst David Campbell.
They also have brought marketing savvy to the segment. Shoppers at the 99 Cents Only in Beverly Hills, Calif., will find a gourmet section with items such as clams, shiitake mushrooms and wine. "The hardest thing is to get the middle class in the store the first time. They see 99 cents and think junk," spokesman Henry Miller says.
The chain also knows how to bring in the crowd: The first nine customers at a 99 Cents grand opening in San Leandro, Calif., this week will get a 19-inch Sharp color TV for, of course, 99 cents.
