retail news in context, analysis with attitude

Smart Money reports that while “it's been a rough sled for retail ... the dollar-store business is growing like crazy. The national chains are drawing higher-income shoppers, reporting record profits and opening new stores on a daily basis. Dollar General, with more than 9,800 locations, is now the nation's largest retailer by store count. Middle-class shopping centers used to shun the discounters, says John Tomlinson, an analyst at ITG Investment Research. Today they're courted as one of the few options for filling vacancies.”

The irony, the story says, is that the dollar store companies concede that they all sell most of their merchandise for more than a buck, no longer specialize in just closeout deals and manufacturers’ seconds, and often cannot beat Walmart on price.

So why are they successful? Tomlinson tells Smart Money that he believes that “folks are so broke and so busy that they can't afford the gas and time required to shop big-box discounters on the edge of town. Your typical dollar store, meanwhile, is close to home and a tenth the size of your average Wal-Mart. Most shoppers spend just 10 minutes and 10 bucks in the store. In 2012, this is how we prefer to shop.

“In coming years? The dollar stores plan to double their store count, a sign that economic recovery is far, far away. So go ahead and cry. There's surely a dollar box of single-ply tissues selling at a convenient location near you.”
KC's View:
In the end, what dollar stores really offer is a kind of differentiated shopping experience, which is what is really driving their growth. But I have to admit that I’m a little skeptical about the industry doubling its size in coming years; I may be wrong about this, but it strikes me as entirely possible that they could overbuild, and that there will be a lot of empty, decaying, former dollar store locations available around the country in the not-too-distant future.