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By: Ravena International  09-12-2011

DOLLARSTORE BUSINESS

A Dollar store or Variety store is a small to mid-size retail store that sells wide array of inexpensive products including household goods, cooking supplies, small tools, personal hygiene products, cosmetic and beauty care products, kitchen supplies, organizational supplies, small office supplies, holiday decorations, electronics supplies, gardening supplies, home décor items, novelties, toys, gadgets, games, gift products, pet supplies, books, small electronics, tapes, paper products, some food products, beverages and automotive supplies.

Some items are sold at a certain very low price point (example: $1.00), whereas other items are offered at a substantially lower price than usual sold at popular large retailers and supermarkets. There are three reasons why Dollar and Variety stores are able to sell merchandise at such a low price:

  • The product is a generic or private label, often specially manufactured for such stores, using less expensive ingredients and processes than products intended for the mass market.
  • The product was manufactured in a foreign country where the labor costs are low and then was imported for mass distribution and sold with much lower markup then similar products offered by other retailers.
  • The product is purchased from another large retail store, direct importer or distributor as discontinued and discounted merchandise.

Dollar Stores in USA and Canada

The originator of the Dollar store concept may be a retail store Woolworth, which began its first operation in 1878 in Watertown, New York. These stores originally featured merchandise priced at only five cents or ten cents, although later in the century the price range of merchandise expanded. Inflation eventually dictated that the stores were no longer able to sell any items for five or ten cents, and were then referred to as Variety stores or more commonly Dollar stores. When adjusted for inflation a nickel ($0.05) in 1913 is an equivalent of $1.15 in 2009 dollars.

The Dollar store retail industry in USA and Canada includes about 40,000 retail outlets with combined annual revenue exceeding $60 billion USD. The average annual Dollar store’s revenue is about $1.5 million USD per year. Major retail chain outlets in USA include Dollar General, Family Dollar, Dollar Tree, 99 Cents Only, Deal$ and in Canada include Buck or Two, Dollarama, Everything For a Dollar Store, Great Canadian Dollar Store, Dollar Giant, and Your Dollar Store With More.

Typical Dollar Store Customer

The core consumer group of the Dollar stores are low to middle-income households / families, which live in small towns, rural areas as well in large urban centers. Although some people may link Dollar and Variety stores with low and mid-income areas, this comparison is not always necessarily true. For example, the city of Atherton, California has a Dollar store within its city limits, even though it has a median household income of over $200,000 USD a year. The retail chain 99 Cents Only boasts that its most popular dollar store is in Beverly Hills, California where the majority of consumers earn very high incomes. This particular store has sales of over $10 million USD per year, whereas an average 99 Cents Only store has sales of around $4 million USD per year. This shows the wide appeal of Dollar stores, the demographic range of their shoppers, and the opportunities they have to expand into higher-income consumer groups.

Economic Landscape

The economic downturn has been a boom to dollar stores, which attracted increased consumer spending in 2008 and 2009 including spending among high and middle income shoppers. In 2008 and 2009, 65% of American households shopped at Dollar stores, and the number continues to increase. While low to middle-income consumers visit Dollar stores the most, higher-income shoppers are the fastest growing consumer segment within Dollar stores, representing new opportunities for opening Dollar stores in metropolitan areas where higher-income consumers are more predominate. According to the recent economic analysis Dollarr stores are outpacing major consumer packaged goods (CPG) channels among both low and high income shoppers. Dollar stores present a significant challenge to other retail channels because they offer convenience, simplicity and low prices that remain appealing to value-conscious consumers. The strength of the Dollarr stores industry in the US is stable and very promising as shown by 2008 Fortune 500 financial magazine reports where Dollar Tree and Family Dollar retailers took #1 and #2 spots as the top-performing US stocks in 2008, generating respectively 60.8% and 38.9% return on investment for its shareholders. To view Fortune 500 magazine reports please visit the following links: Fortune 500_2008 financial news:  &  

Variety Stores in Europe and the Rest of the World

Most of the Dollar stores operating outside of the US and Canada are commonly called Variety stores. These stores differ from country to country and most of its names incorporate words from a local foreign language as well a local currency used. It is somewhat difficult to do a detail analysis of the Variety stores industry as a whole outside of the US and Canada due to its complexities and not having up to date a readily available data. However, in the last several years the upward trend in the numbers of stores operating around the world indicates positive economical trend now and in the future for this type of retail industry. The major European Variety stores retailers are:

  • in United Kingdom: Poundland, 99p Store, Pound Strecher
  • in Germany: Euroshop, T€Di, Pfenningland
  • in France: Prisunic, Monoprix, Magasin à Prix Unique
  • in Italy: NinetNine Cent Paradise, Tutto a 99 Cent
  • in Netherlands: Euroland

Summary

Based on its worldwide presence and solid financial performance over the several decades as observed in the US and Canada as well in recent years in Western Europe, India, Japan and Australia it can be concluded that the Dollar and Variety stores are going to be even more successful in the years to come. Looking at their rapid growth all over the world over the last two decades particularly in the US and Canada, the Dollar and Variety stores are becoming very attractive retail outlets for consumers who would otherwise shop at traditional large retailers and supermarkets. These stores offer for its shoppers not only convenience, proximity, simplicity and a fun treasure-hunt shopping experience but what’s very important…a wide selection of basic household and personal products with low prices that will always remain appealing to value-conscious consumers.

The information in this article was current at 06 Dec 2011