Posted on: Sunday, May 16, 2004

Dollar stores develop niche market in retail

By Heather Landy
Knight Ridder News Service

FORT WORTH, Texas — In an era of $4 coffee drinks and $6 tubs of movie-theater popcorn, a dollar may not go as far as it used to.

But more and more consumers are finding a way to stretch a buck by shopping at dollar stores, giving rise to a niche market that has become one of the fastest-growing segments of the retail industry.

Dollar General, the biggest of the dollar stores, has more than 6,800 stores, and it plans to open 695 this year.

Other retailers are getting into the game. Mervyn's recently installed a "$1 to $5 Shop" in each of its stores. Target and Wal-Mart also have experimented with dollar-merchandise sections.

Driving the trend is an economic climate that has prompted many consumers to pay more attention to prices, along with a cultural shift that has lifted the stigma long attached to discount shopping. At the same time, dollar stores have improved their merchandise and increased the number of name brands they carry.

Fort Worth resident Cheryl Omer, who periodically stops at dollar stores to buy trinkets for her grandchildren and paper goods for the preschool where she works, said she doesn't give a second thought to the snob factor that once had many shoppers thumbing their noses at dollar stores.

"An American Greetings card is an American Greetings card, regardless of where you buy it," Omer said.

Growing acceptance of the concept has allowed dollar-store merchants to reach beyond the rural towns and low-income neighborhoods where many got their start.

Though dollar stores may be new to higher-income consumers, they've long been a part of the retail scene. Dollar General and Family Dollar, which have more than 12,000 stores between them, started in the rural South in the 1950s as an outgrowth of the five-and-dime industry.

"It's amazing when you go into dollar stores and talk to people. They go in there with four or five things in mind that they think they might buy, and they come out with 10 or 12 items," retail consultant and consumer researcher Britt Beemer, chairman of America's Research Group.

Today, consumers frequent dollar stores for more than just novelty toys and plastic trinkets. Dollar stores have become a major destination for household cleaners, school supplies, beauty aids, home accessories and even groceries. Several larger chains have their own lines of paper goods, tools and glassware sets.

"We don't just want to sell cheap things. We want to sell expensive things cheap," said Adam Bergman, spokesman for Dollar Tree, a chain with more than 2,500 shops.