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Updated: 1:10 p.m. Saturday, Dec. 10, 2011 | Posted: 1:09 p.m. Saturday, Dec. 10, 2011
By Tristan Navera
Staff Writer
DAYTON — Dollar stores are a growing force in discount retailing, a new study shows.
The combined number of stores operated by the four top chains — Dollar General, Dollar Tree, Family Dollar and 99 Cents Only — has surpassed that of the three biggest national drugstore chains — Walgreens, CVS and Rite Aid, according to Colliers International, a commercial real estate research firm.
The top four dollar-store companies now operate 21,500 stores in the U.S., Colliers said. Ohio has the third largest number of dollar stores with 1,106 as of January. It is topped only by Florida and Texas.
And dollar stores are popping up in increasingly better locations as landlords become more enamored with their ability to draw people.
Ann Natunewicz, a retail research manager for Colliers, authored the report. She said dollar stores have grown by increasing their selection of food products to compete with supermarkets and big-box stores. That move has increased the number of trips customers make to the stores, which helps generate higher sales of products throughout the stores.
Dollar stores also have upgraded their appearance and merchandise presentation, making them more attractive to broader range of consumers, Natunewicz said.
“The convenience they provide — bringing better products at lower prices closer to the consumer — helps dollar stores to better serve existing customers and attract new ones,” Natunewicz said. “Retail is habit-forming; the longer shoppers patronize a particular store or category, the more likely it is to become a permanent shopping destination.”
Dollar General, which has 36 stores in the Dayton area, on Monday reported $3.6 billion in third-quarter sales, up 11.5 percent from third quarter 2010. Net income for quarter totaled $171 million, up 34 percent from the same time period in 2010.
Dollar Tree, which has 10 locations in Dayton, reported a profit of $104.5 million, up from $93.2 million a year earlier. Sales jumped 12 percent to $1.6 billion.
Family Dollar spokesman Josh Braverman said the chain has also seen an increase in revenues. The company reported $2.26 billion in net sales for the second quarter this year, up 8.3 percent from last year. 99 Cents Only, which has no locations in Ohio, saw a net sales increase of 8.8 percent to $363 million in 2010.
Robert Premus, a professor of economics at Wright State University, said it was not surprising people are trading down on some products dollar stores offer.
“We don’t have to be in bad economic times to want to save money,” Premus said.
Kathy Grannis, a spokeswoman for the National Retail Federation, said the trend is indicative of a potentially permanent shift in consumer shopping habits.
“Consumers are very smart shoppers now,” she said. “While there are still many brands they’re not willing to part with, there are a few other items they’re willing to take a second look at.”
Grannis said the shift comes as consumers are more accepting of cheaper off-brand alternatives to some products. She noted NRF saw large growth for the major dollar store chains in 2010, though those sales have been less drastic this year as the economy has improved.
“In recent years dollar stores have revitalized their brands ... freshened up their images,” Grannis said.
Natunewicz said the businesses are attractive for landowners, too. .
She said the increased sales for dollar stores come at the expense of small town retailers who can’t compete with their prices and variety, as well as big box stores as consumers seek to avoid crowds
“The reality is the economy of these stores and the traffic these stores bring in makes them very lucrative,” Natunewicz said.
“For Family Dollar, it really comes down to value and convenience,” Braverman said, “We put our stores in neighborhoods where people live, so it’s a convenient shopping experience for them to get the brand names and save a dollar or two.”
Fatima Mustafa of Ghazi & Son, a Riverside dollar store, agreed things aren’t easy for his smaller business.
“I see more people coming in but not that many,” he said, “A lot of things we used to get we can’t. It’s more difficult because it’s more expensive.”
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