Warren Shoulberg of The Robin Report tells his readers that traditional dollar store customers are now going to Walmart. He writes:
This was supposed to be their glorious time. When shoppers are feeling stressed about prices and want to start trading down in their purchases, it has historically led them to one place: dollar stores. But not this time. We’ve pinpointed five reasons dollar stores are failing.
“The traditional dollar store customer is now going to Walmart. That detour may not be a first choice, but certainly, Walmart is squarely in their purchasing paths. Bottom line? Walmart is making the sales that used to occur at all those thousands and thousands of Dollar General and Family Dollar outposts.”
Dollar Under Siege
The dollar store sector – led by the two giants in the field, Dollar Tree/Family Dollar and Dollar General – is under virtually unprecedented turmoil, closing stores, looking at divestiture plans and desperately trying to find a new formula for their businesses. Whether they will figure it out during this retail downturn when the conditions are most ripe for their turnaround is the great unknown. And while the retailers’ own execution is often cited as the big reason for their lackluster performance – and, make no mistake about it, it is a major factor – it’s a far cry from the only one that is causing the dollar doldrums. Here are the five key factors for why dollar stores are underperforming.
1) In-Store Execution, or Not
2) Walmart Is Much, Much Better at Attracting this Shopper
3) Aldi Is Taking Market Share
4) Online Is Offline
5) This Economic Squeeze is Different than 2008-2009
Dollar stores are not going away as previous generations of variety five-and-dimes and catalog showrooms did. The dollars will figure it out. Maybe there’ll be fewer of them…although it’s quite possible there could be even more. They will clean up their acts – not to mention their stores too – and remerchandise their footprints the way convenience stores are now doing. There will be some rearrangements too; don’t be shocked to see Dollar Tree shed its Family Dollar division if private equity buyers have the appetite.
And then secondary players in the sector – Five Below particularly – will also rework their formulas to adapt to the changing consumer. It’s what good retailers do. And bad retailers? What do they do? They go out of business.
Read more here.
