Dollar stores already had a strong presence in the retail marketplace before the recession, but they have transformed into a powerhouse by stocking their shelves with national-brand merchandise that appeals to both lower-income households and higher-income shoppers forced to become more thrifty.
Both nationally and in southwest Ohio, the industry is dominated by three major players:
• Dollar General is the industry leader that two months ago opened its 10,000th store in the U.S. The company sells its own private-label products but also stocks brand-name merchandise. It has about 50 stores in the greater Dayton area, from Eaton to Springfield and from West Milton to Lebanon. The most recent Dayton store opened in August 2011 at 2228 N. Gettysburg Ave. Total 2011 net sales jumped 13.6 percent to $14.8 billion, and same-store sales increased 6 percent, thanks to increased customer traffic and higher average transaction amounts, company officials said.
• Family Dollar operates about 7,100 stores nationwide, including 42 stores in the Miami Valley from Lebanon to Tipp City and from Eaton to Springfield. The chain is finishing a new store expected to open by the end of June at 5958 Old Troy Pike (Ohio 202) in Huber Heights. The 8,000-square-foot store, which is being built on a lot that had been empty, will open less than six months after Family Dollar opened another new store at 1028 N. Gettysburg Ave. in Dayton. The company said total net sales for the second quarter of its 2012 fiscal year rose 8.6 percent to $2.5 billion, while same-store sales rose 4.5 percent from increased customer traffic and higher average sales transactions.
• Dollar Tree operates about 4,450 stores in the U.S. and Canada and about 15 stores in the Dayton area, including stores in Lebanon, Springfield and Piqua. Earlier this month, the company reported first-quarter sales reached $1.72 billion, up 11.5 percent from 2011, while same-store sales rose 5.6 percent. Dollar Tree officials said the company has reported double-digit year-over-year percentage revenue growth for the past five quarters. The company opened a Piqua store, its most recent new store in the Miami Valley, in 2009.
It’s apparent that company officials at the Big Three dollar-store chains have no qualms about locating in close proximity to one another. In the short stretch of North Dixie Drive between Siebenthaler Avenue and Needmore Road in Harrison Twp., shoppers can find all three of the national dollar-store chains. And shoppers who drive Wayne Avenue in Dayton can choose from the Dollar Tree store at 1905 Wayne Ave., Dollar General Store at 1431 Wayne Ave. and a Family Dollar store at 1125 Wayne Ave.
Justin Waterman — analyst for Los Angeles-based IBISWorld, an independent industry research firm, and author of the firm’s “Dollar & Variety Stores in the U.S.: Market Research Report” that was released in April — said the Big Three dollar stores are not necessarily looking to locate their stores close to each other, “but they do want to be close to the demographic they’re serving,” and they end up clustering together more by accident than design.
That target demographic is changing, however — shifting from a market that was skewed almost exclusively toward low-income residents in densely populated areas to a more diverse target market that includes more middle-income suburban residents, Waterman said. The large chain dollar stores have expanded the size of their stores, improved the displays and added national brand names, among other strategies, to appeal to a broader target market, he said.
Those moves coincided with an improvement in suburban consumers’ perception of dollar stores, Waterman said. As more suburban shoppers turned to dollar stores during the recession, suburban residents started hearing about and noticing the bargains their neighbors were getting at the dollar stores, and started checking out the stores for themselves.
“The stigma surrounding dollar stores has kind of gone away” in recent years, Waterman said.
The analyst’s dollar-store industry report calculated that the industry’s revenues grew by an average of 4.3 percent per year over the last five years, and projected growth will continue — although at a slower pace of 2.6 percent a year — for the next five years.
Serdar Durmusoglu, assistant professor of marketing at the University of Dayton, said dollar-store chains “need to expand their target market” after taking advantage of the lengthy recession and competing, often successfully, against discount stores such as Wal-Mart, drug stores such as CVS and Walgreen’s, and grocery stores.
And the dollar-store chains are doing exactly that: A subsidiary of Dollar Tree — Deals Dollar Store — has opened a pharmacy in one of its stores in West Park, Fla., and the chain’s top officials have hinted that more pharmacies may be coming to other stores. In addition, Dollar General has been adding grocery items to an increasing number of stores nationwide, and Waterman said that trend is catching on with other dollar store chains.
Even with the larger stores and greater variety of merchandise, deep-discount chains are not large-scale job creators, at least not on a per-store basis. Dollar General and Family Dollar officials said their stores typically employ 10 or fewer people, while a Dollar Tree spokesman said his company’s stores typically employ about 15.
But dollar store chains are making their presence in the community felt in other ways. The Dollar General Literacy Foundation announced this month that it has awarded a $3,000 grant to Dayton Metro Library. The funds will be used to further Dayton Metro Library’s summer programs for children and teens.
Contact this reporter at (937) 225-2258 or mfisher@ DaytonDailyNews.com.
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