March 22, 2004,
When it comes to down and dirty retailing, dollar retailing is the ultimate game of inches. It is also rapidly becoming the next stone to unturn for a variety of non-dollar-store retailers.
Meanwhile, Dollar General — the granddaddy of formats serving the low-income segment — is taking a page from the discounters' books by launching a new food-driven format that, in its two-store test, is outperforming plain Dollar General stores. Also borrowing from other channels, Dollar General will look for more opportunistic buys and has opened its first Asian office to boost direct imports.
On the one hand, all this boils down to one more example of retail formats filching strategies from one another in the never-ending battle to grab a piece of the other guy's market share. On the other hand, it says a couple of things about the way consumers are shopping these days.
First, there is the assertion by Dollar General and others that low-income households constitute the fastest growing segment of the population. (And by the way, how scary is that?) In an industry where "moderate goods" are considered to target the broadest swath of consumers possible, a peddler of moderates has to seriously consider whether those goods are going to wind up being "aspirational" for a big chunk of the population.
For vendors and retailers of better goods this also raises several questions. Are buyers of better goods shrinking in proportion to lower income households? If so, will the remaining buyers of better goods buy in sufficient quantities to maintain the channel? If not … no sweat, right?
Ah, not so fast.
There's evidence that the better and moderate consumers who migrated into discount as a cross-channel shopping venue in the last decade have now found their way into dollar stores.
A study released last month by WSL Retail reported that 62 percent of women had shopped dollar stores within the previous 90 days — just 1 percent lower than the visits those same shoppers made to supercenters during the same period.
Clearly, the treasure-hunt mentality is now pervasive across all channels, not surprising in a universe where every day is sale day at some store, down some aisle and on some item. I think the phenomenon also reflects the growing idea that consumer products — even fashion goods — are relatively disposable, like a trendy blouse from H&M or a pair of funky flip-flops from Kmart.
So just when it seemed like all anybody really had to worry about was inventory levels, on-time deliveries and, oh yeah, good product, a new battle is joined. This one chases market share one dollar at a time.