Date: July 22, 2018
Are Dollar Stores The True Retail Disrupters?
Lost in all the news this past week about Amazon’s massive Prime Day results, Walmart WMT +0%’s multi-pronged effort to stay competitive and assorted Chinese e-commerce shenanigans was perhaps the single most important statement about the current state of American retailing. Dollar Tree DLTR +0%, parent company to both its namesake stores and Family Dollar, announced it had just opened its 15,000th store. That would be remarkable unto itself if it weren’t for the fact that in reaching that total, Dollar Tree only equals the approximate number of stores operated by its main rival in the small-box discount category, Dollar General DG +0%, which also has around 15,000 doors.
Think about that: 30,000 stores between just two retail chains. And that doesn’t include all the dollar-wannabes like 99¢ Only Stores, Dollarama , Five Below, Jack’s and on and on. And by the time you finish reading this, one or two additional stores might have opened.
The numbers are astonishing:
- The two big dollar chains combined have more stores than the six biggest U.S. retailers – Walmart, Kroger, Costco, Home Depot, CVS and Walgreens – combined.
- Grouped together, all the major department store chains in the country – Macy’s, Kohl’s, Nordstrom, JCPenney, Dillard’s, Saks/Lord & Taylor, Neiman Marcus and Belk – equal less than 15% of the total number of dollar stores.
- Even the high-flying off-pricers don’t stack up very well: TJX, Ross, Burlington and Big Lots together have less than a third the number of stores that the two big dollar players operate.
- On the revenue side, the numbers are less dramatic but no less worth noting. The annual sales of Dollar Tree and Dollar General together are more than those of Macy’s and JC Penney together, of TJX and Ross together, and of Apple Stores – including iTunes.
And of course, none of this counts the business the dollar stores have done since you started reading this.
Yet the role of dollar stores in the massive deconstruction of American retailing is barely mentioned whenever all those experts get together to pontificate about such things.
Yes, online and off-price are having a massive impact on the changing retail scene. But so, too, are the dollar stores, which are changing the landscape in ways that are not clearly understood.
Consider the way the supermarket business is being turned upside down. While Amazon’s purchase of Whole Foods, online delivery services and even the twin invasion from Germany of Aldi and Lidl get the headlines, those developments are largely rounding errors compared with the way dollar stores have changed the way Americans shop for consumables.
Or how about the efforts Walmart and Target are making to open smaller, neighborhood-format stores? These are largely positioned as initiatives to move into more urban, higher-density areas where superstore formats just won’t fit. In fact, they are missing the point completely by not targeting dollar stores in their backyards – the rural and exurb areas between the big cities.
Dollar stores are one of the key reasons the big drug-store chains are frantically trying to build upon their pharmacy and medical services businesses. These are categories in which the dollar stores can’t really be competitive and drug chains can offer points of differentiation from the competition.
Even the struggles of such retailers as Penney, Bed Bath & Beyond and Gap should be rightfully traced back at least in part to their true origins – the market share gains by the dollar stores – rather than other real and imagined retail bogeymen.
Much of the lack of understanding about how the dollar stores are really disrupting the marketplace has to do with geographic ignorance. For the most part, the people doing the analyzing aren’t seeing the dollar store role up close and personal. To do so, one must go outside the big cities and the big interstates; once there, you can’t go more than a few miles without tripping over a store with the word “dollar” over its front door. And chances are it won’t just be the one. They tend to cluster, like scavengers feasting on the carcasses of the dead.
The analogy should not be lost on anybody. The dollar stores – led by Dollar Tree and its Family Tree unit, as well as Dollar General – are picking apart the rest of the market and ultimately are going to be the retail survivors. And a lot of people won’t even have seen it coming.