We had a piece here yesterday about the growth in the dollar store channel, which led me to comment:
The growth of the dollar store format, and its perfect positioning at a moment of inflation and recession concerns, means that it may be the biggest threat to many conventional stores - especially those without a definitive and differentiated value proposition and brand image.
I do find myself wondering, though … would it have made more sense for Kroger to acquire a dollar store chain rather than Albertsons? Would such a move been more additive in terms of depth, and not just breadth?
MNB reader Monte Stowell responded:
Great question Kevin about Kroger buying a Dollar Store chain. Why has Kroger not adopted that it’s pricing and merchandising to go after the Dollar Store Customer? All I know is lots of my friends are buying a lot of items at Dollar stores instead of Fred Meyer. All Kroger has to do is take a look at certain category items and create a Dollar store in their existing stores. Fred Meyer for example has plenty of square footage to do so. Sometimes the obvious cannot be seen and the appropriate action to do something has not been acted upon. The pricing disparities between the Dollar Stores, er’ $1.25 stores and the conventional retailer had created the paradigm shift of where people are shopping. Opportunity awaits for major chains to wake up. Today's consumer is a pretty smart lot.
Another MNB reader responded:
Regarding the dollar store growth article, the expansion of these formats from the major chains in the channel has been interesting to watch over my 40 year career in the industry. The new modern “dollar store” is a welcome sight in most rural markets by the consumer base, however, as with most retailers, many of the legacy stores are not well maintained, nor updated. For example, in our small Missouri town, the dollar store competes with one regional grocery store. The grocery store is newer, while the dollar store is very old, dirty, hard to shop and located in an area that is off the beaten path. This same dollar store is very competitively priced versus the grocery store for consumers looking to stretch their dollars.
It reminds me of a chain that built stores based on cheap real estate, and as those stores continue to be profitable (often due to a consumer base with limited options in rural cities), Capex for those locations are often reduced or eliminated. Horrible parking lots in need of repair, dilapidated store conditions, narrow aisles, no ease of shopping due to stock carts placed on every open aisle space, and out of stocks due to trucks not being worked to the shelf. We know this is part of the limited staffing business model and “cash-cow” status of these legacy locations, but what could the volume be in these legacy stores if they were properly maintained?
And from another reader:
Seems to me that Kroger is using their delivery program to combat $ stores. I live in an area that I pass 4-6 $ stores to get to grocery store. They often get my money, but increasingly their staffing and conditions have worsened (2 different chains). Seems to me where the store gaps lie, there are gaps in the available qualified work force. My guess is that the $ store needs to do more with each man hour to hit a return?
On another subject, from another reader:
The article mentioning Kroger looking at frictionless check out made me chuckle. I’m a loyal shopper (not that I have a choice) of Kroger in their headquarter town of Cincinnati. They don’t even have credit card readers where you can “tap” your card. Their readers are probably 10 years old and work “most” of the time.