As Al Reiss and Jack Trout wrote in The 22 Immutable Laws of Marketing:
“A company can become incredibly successful if it can find a way to own a word of the prospect.
Not a complicated word. Not an invented one. The simple words are best, words taken right out of the dictionary.”
The most effective words are simple and no matter how complicated the product,
it’s always better to focus on one word than two or three or four.
The essence of marketing is to narrow your focus and the brand becomes much stronger when you reduce the scope of
operations and concentrate on your core product.

When it comes to retail and convenience, there is not one leader that dominates the “law of focus” but instead
an entire category is differentiated by one simple but self-described word: ‘dollar.’
Together, the top three dollar-store chains are growing considerable market share from a spectrum of retailers–from
grocery stores to drugstores to pharmacies. These rock-bottom discounters are expanding their stores and filling the
aisles with nationally known brands that lure in both the low-income shoppers who have been Wal-Mart’s core customers
and higher-income households now practicing thrift after getting hit hard from the recession.

Dollar Tree (DLTR), Family Dollar (FDO) and Dollar General (DG) have all grown into dominating dollar store chains that
are nibbling away market share from a diverse spectrum of retailers. This aggressive expansion strategy has been somewhat
of a surprise to many competitors as the mere swarm of smaller box stores has become aggravating for the big box boys like Wal-Mart and Target.
Although the dollar stores were once a complimentary co-tenant with the leading grocery and drugstore chains,
the free-standing dollar stores are now penetrating practically every street block where a city bus is parked.

Wal-Mart (WMT) has a proven business model of being the one-stop, once-a-week destination retailer and
the dollar stores are distinguished by the fill-in shopping habits aimed to provide convenience during the
weekly travels from work or school. These heavy discounters aren’t necessarily looking to be the
primary place shoppers go to stock up for the week.

They fall short of Wal-Mart or a full-scale neighborhood grocer, and are markedly less pricey than your corner convenience store.
Dollar General, the largest dollar store chain in the U.S., recently (March 30) opened its 10,000 store in Merced, CA.
The Tennessee-based chain added 63 units in the space of roughly two months, which sounds like a lot,
bit is actually a little off the pace the company needs to achieve the 625 new stores slated to open this year.

Going forward, DG needs to average 1.8 new stores per day to hit its new-store expansion target of 625 units
and seven percent square footage growth by the end of its fiscal 2013. And then DG needs to maintain or possibly
accelerate that pace over the coming fifteen years, as Dollar General claims the U.S. market is capable of supporting upwards of 20,000 stores.

Family Dollar, the second largest chain operates around 7,100 stores and like Dollar General,
the aggressive growth plans include a net new 450 to 500 stores this year.
The real estate strategies for Dollar General and Family Dollar are similar in that the sites
they occupy are typically along primary arteries near the low-income transit routes.
This site selection strategy provides these two leading chains with impulse-oriented visits aimed to attract convenience minded consumers.

Dollar Tree is the third largest dollar chain with around 4,350 stores. The Chesapeake,
VA -based chain operates a differentiated real estate strategy in that the stores are typically
located near a major discounter like Wal-Mart or Target. The products are virtually the same as
Dollar General and Family Dollar; however, Dollar Tree is a little larger selling space
(of around 10,000 square feet) versus the 8,000 to 9,000 square foot stores operated by the larger peers.

Wal-Mart’s real estate strategy was once like a “sleeping giant” however, the dominant discount chain has
reacted by bringing back many of the products (previously cut), adding displays focused on
low-priced food and consumables, and launching promotions for everything from apples to turkey trimmings.
Wal-Mart has the advantage of having both the national brands the dollar stores have and private labels
that are well known to shoppers and that bifurcated approach has allowed Wal-Mart to build on its dominating platform.

Alternatively, the dollar stores still provide customers with a more convenient shopping experience and
these smaller stores allow shoppers to locate parking near the front entrance and get in and out quickly.

Prior to 2000, the drugstore chains were the dominating place for convenient shopping; however,
the dollar-store chains have begun to build a slim lead over the top three pharmacy brands (Walgreen, CVS and Rite Aid).

As this snapshot (below) illustrates, the combination of dollar stores and drugstores across
the U.S. has made a profound impact on the wave of convenience and the continued growth is sure
to have considerable effects on saturation and cannibalization.
Today there are around 41,500 combined drug and dollar stores (top three of each sector)
and the competitive landscape is not going to end any time soon.

With a combined 21,311 stores, the dollar store sector (top three chains) is now larger than many
of the leading brands and is closing in on Subway, the largest chain in the U.S. With a forecasted 20,000
more stores slate to open in the U.S., the dollar store sector should some be the most dominating retailer on the planet.

The dollar store dynasty has rolled out some impressive results as all of the top three chains
have provided remarkable growth. Although the smallest chain of the three, Dollar Tree has provided
the largest stock increase (51 percent year-over-year) while Dollar General and Family Dollar have
produced increases of 32 percent and 15 percent respectively.

Another powerful indicator of shareholder performance is return on equity (gauges net income vs. shareholders’ equity).
Accordingly, all three of these leading dollar store chains are growing the bottom line as evidenced by
performance-based returns as profit for every dollar of equity. All three chains have demonstrated rising
ROE’s showing that management is providing skilled leadership in its strategic growth initiatives.

All three dollar chains have performed extremely well and the demand fundamentals should continue to
provide investors with strong results. On Friday (April 13), Moody’s lifted Dollar General’s corporate
family rating and probability of default rating to Ba1 from Ba2, with a positive ratings outlook.
S&P also recently upgraded Dollar General’s rating from BB to BB+ (S&P’s highest speculative grade rating).
Moody’s said the upgrade acknowledges that Dollar General’s operating performance and credit
metrics are expected to remain strong, with debt to EBITDA of 3.0 times and EBITA (without depreciation)
to interest expense of 4.4 times. The upgrade also follows the company’s refinancing of approximately $880 million
of its term loan, which extended its maturity to July 2017 from July 2014.
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While Dollar General’s credit ratings are in the brink of investment grade, Family Dollar has a BBB- S&P rating
and Dollar Tree is not rated (due to minimal long-term debt). These improved ratings are further evidence
of the increased cash flow from store operations and the increased strength of the dollar store category.

The dollar store sector has seen considerable growth and the prospectus for increased performance is extraordinary.
Dollar General has especially developed a sound growth strategy with its risk-aligned capital initiatives of
reducing debt and growing sales. Since 2008, Dollar General has reduced its debt by around 50 percent
(interest expense decreased by $69 million in 2011 to $205 million). In addition, Dollar General generated
approximately $1.05 billion of cash flows from operating activities in 2011, an increase of over 27 percent compared to 2010.

So as the essence of marketing is narrowing the focus, the dollar stores have become strategically stronger by reducing
their scope of operations and focusing on one simple formula–the dollar model. By exploiting this
differentiated retail model, dollar stores have become extremely successful and the narrowly focused
strategy has resulted in an increased threat for many retailers. The drugstores and discount stores
are no longer “sleeping giants” as the army of (dollar) stores is gaining significant advantage in
the size and scale of the convenience-based dollar store model.

Mark Lacter • February 7 2012 9:35 AM
http://www.laobserved.com/biz/2012/02/where_are_the_dollar.php

Virginia, Mississippi, Alabama and Louisiana have the largest concentrations of dollar stores. Indeed, something like a “dollar store belt” can be discerned, stretching from Ohio and Indiana in the north, through Kentucky and Tennessee to the Gulf Coast.

Within the District, there aren’t actually very many dollar stores per 10,000 residents, but it is worth noting that ones here tend to be found east of Rock Creek Park in less affluent residential neighborhoods.

http://www.washingtoncitypaper.com/blogs/citydesk/2012/02/07/the-dollar-store-belt/

Posted by Shani Hilton on Feb. 7, 2012 at 10:41 am

So stop by and see the new store and spend some Dollars while you are there!!

So if you are heading up Hwy 4 make a right on Tom Bell Road and the new store is on the left in the same shopping center as Eldorado Savings

Consumer experts said dollar stores were once considered “low class,” but the current state of the economy has nearly made the stereotype disappear.

“Everybody wants a deal. I think we tend to have this idea that the only people who are going to shop in these stores are lower-income people or people who absolutely need a bargain. That’s just not true,” said George Belch from San Diego State University.

Belch said as the stores become more popular, consumers can expect to see more store locations across the country.

Dollar stores have become a force to be reckoned with as they are among the hottest high-growth retailing sectors. As wholesale topic writer, Claudia Bruemmer, explains, “Posting some of the highest growth rates across retailing in recent years, largely due to rapid expansion, solid sales gains and increasing consumer interest,” dollar stores, both independently owned and chain operations, have seen significant expansion. The white paper, “Dollar Days: How Dollar Stores are Growing in a Weak Economy,” explains such rapid growth to be a result of consumer confidence in value and bargain buys.

Dollar Stores Out-selling Other Retail Sectors
A 2011 survey conducted by America’s Research Group, reveals that Americans plan to stretch their dollars by shopping at discount chains rather than the pricier department stores and specialty chains, with 753 out of 1,000 survey participants picking discounters as potential shopping destinations. Britt Beemer, president of America’s Research Group, notes that even low price leaders will be faced with intense competition, saying, “Wal-Mart has a new enemy called the dollar store.” A study by Colliers International reveals that dollar stores have encountered such fast pace expansion that they are also currently outnumbering national drug store chains.

It is true that some of the leading players in this retailing sector are dollar store chains such as Dollar General, Dollar Tree, Family Dollar and 99 Cents Only, which are driving store traffic and upping transaction size by adding more high-turn consumables and improving in-store presentation. But it is the fact that dollar stores now serve a larger consumer base, which has also allowed many independent discount/dollar stores to thrive and pop up across the nation. In fact, a study by Retail Forward estimated that enough untapped and under-penetrated geographic markets exist in the U.S. to support another 15,000 dollar store retail outlets.
( http://independentretailer.com/2011/12/06/dollar-stores-prove-to-be-a-high-growth-retail-sector/ )

If Dollar stores are gaining ground on retail giant Walmart (WMT) its due primarily to location and convenience according to a recent consumer perception study conducted by leading market research firm ClickIQ, Inc. Consumers who had shopped a dollar store in the past month were surveyed on their retail shopping habits and the number one reason consumers cited for shopping Dollar General (DG [FREE Stock Trend Analysis]) is proximity to their home or work (71%). The second most cited reason for choosing Dollar General is “best everyday prices” at 57%. Of all respondents, 87% also shopped at Walmart in the past month.

According to the study, 57% of those who have shopped Dollar General in the past month live within three miles of the retailer. The average is 3.3 miles (self-reported). Respondents estimate that the nearest Walmart is about 5.4 miles away from their homes. 62% of Dollar General shoppers indicated that they would be extremely/very likely to shop Walmart if they had a store that was the same size and the same distance as their local dollar store.
“The economic reality of dollar store/Walmart cross-shoppers is also a factor in their choice of retailer,” said Robert Boese, VP Operations, ClickIQ. “The study showed that the average weekly grocery budget for families in this group is a self-reported $98. Furthermore, 20% of these respondents indicate that they are on some form of government assistance. This might explain why 55% of dollar store shoppers indicate that high gas prices influence them to shop retailers closer to home. With continuing high gas prices and unemployment, consumers appear to be calculating the ROI on each shopping trip.”

Methodology
Data was collected in an online survey with 399 of ClickIQ’s US consumer panel from July 5, 2011 through July 7, 2011. Target respondents had shopped at Dollar General at least once in the past month. The survey results have margin of error of +/-5% at a 95% confidence level.
About ClickIQ
ClickIQ, Inc., based in Minneapolis, Minnesota, is an award-winning market research firm that employs fully integrated online management tools, a proprietary consumer panel, and skilled market research analysts to deliver quantitative consumer and shopper insights to some of the best known and most respected companies across the U.S.

The dollar-store chain reports that its fastest-growing segment is customers who are making more than $70,000 per year.
GOODLETTSVILLE, Tenn. – Dollar stores haven’t lost their appeal to bargain hunters, Marketing Daily reports. Dollar General reports that wealthy shoppers continue to flock to their stores, making those with household incomes above $70,000 annually the chain’s fastest-growing customer demographic.

Half of the chain’s new customers are from non-core, higher-income families, with 22.4 percent in the $70,000 or more household category, said Rick Dreiling, chairman/CEO. Low prices initially are the attraction — the stores sell nearly a quarter of their products for a buck or under — convenience has become more crucial.

“We’ve made a radical shift,” said Dreiling. “We proudly sell both national brands and private-label, focusing on everyday necessities at compelling prices. We have a broad selection, but not very deep.”

Prices usually fall 41 percent under drugstore prices and 22 percent less than grocery store prices, but supercenters typically match dollar stores in cost. “But with an average size of 7,100 square feet and cost parity with supercenters that are 125,000 square feet, we are more convenient,” he said.

Dollar General also has revamped its marketing plan to use “our store as the communication tool,” and will be launching a new social media campaign. Customers still favor the chain’s low prices, which drives shopper loyalty.

Looking to the future, Dreiling pointed to expansion goals of 625 new stores and 550 redesigns in 2011, plus adding overall square footage by 7 percent per year. Dollar General hopes to add 11,000 new locations, including 8,000 in existing areas, and the rest in new states, such as California, Connecticut, New Hampshire and Nevada.

Walmart Forced To Compete With Dollar Stores For Customers

In May last year, I asked the musical question, “Can dollar stores survive an
economic recovery?” The collective answer seems to be a resounding “Yes!” Not
only are dollar stores surviving, they’re thriving and, according to an article
in the New York Post, that’s forcing Walmart to compete with them for the
lower-income shoppers that deserted them when the recession hit.

Several sources close to Walmart report that the company has begun vigorously
demanding that suppliers provide the cheapest items in any given product
category. That means pressing big partners like Procter & Gamble and Kraft Foods
to produce smaller, more affordable packages for everything from diapers to
laundry soap.

Walmart will also be looking for new manufacturers who can deliver lower prices
for cosmetics, party favors and greeting cards.

According to a recent survey of Walmart’s vendors, Family Dollar and Dollar
General pose the greatest threat to Walmart over the next five years. As
reported earlier, Dollar General has plans to open 625 new stores this year,
adding to the 9,200 stores already in operation. Family Dollar will open 300 new
stores in 2011.

The fact that dollar stores have more convenient locations and smaller package
sizes, appeals to lower-income consumers. And they’re not sacrificing quality,
either. Both Family Dollar and Dollar General carry some of the biggest brands
around, including Tide, Huggies and Campbell’s.

Even at dollar stores featuring items strictly $1 or less, you’ll find brand
name food, glassware and other household items like Sunbeam batteries. 99-cent
Only Stores carry products from Kraft, General Mills, Unilever and Cadbury, to
name just a few of its suppliers. And where else are you gonna get a five pound
bag of potatoes for under a buck?

If dollar stores can do it, I presume Walmart can, too. When dollar stores first
became popular, I noticed that some of the bigger stores made half-hearted
attempts to lure shoppers with dollar deal aisles. But it wasn’t necessary to
their bottom line and the idea pretty much petered out.

Walmart will likely be able to stock items priced right for lower-income
families but its large stores won’t be able to replicate the relaxed atmosphere
or thrill of the hunt that makes dollar stores a pleasure to shop in.

Marlene Alexander is a freelance writer and dollar store diva. She writes tips
and ideas for home decorating using only items from the dollar store.

Which has better bargains, grocers or dollar stores?

Real Simple’s Sarah Humphreys reveals which items you should be buying at the dollar store to save and which items are worth splurging on at the grocery store.

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