Dollar stores are going to dominate Canada, U.S. retail: expert
Montreal-based Dollarama has amassed over 1,000 locations, and has a presence in every Canadian province.
Published Wednesday, September 13, 2017 2:05PM EDT
Last Updated Wednesday, September 13, 2017 6:33PM EDT
The North American retail landscape is going to look a lot more cheap and cheerful as dollar stores occupy more of the brick-and-mortar spaces abandoned by up-market rivals.
The rise of the dollar store appears to be part of a broader resurgence in physical retail that clashes with long-held assumptions about powerful e-commerce players like Amazon’s impact on traditional shopping habits.
A recent study by global research and advisory firm IHL Group suggests large U.S. retailers will open 4,080 more locations than they close this year. That figure is projected to rise to more than 5,500 in 2018. IHL found 46 per cent of the expansion among the top 16 fastest-growing brands was driven by just two U.S. chains -- Dollar General and Dollar Tree.
The study, titled “Debunking the Retail Apocalypse,” reviewed more than 1,800 U.S. retail chains that have 50 outlets or more.
Dollar store dominance is a trend that is playing out in Canada as well. Dollarama’s same-store sales, a key measure of retail success, jumped 6.1 per cent in its second quarter over the same period last year. The company’s Toronto-listed shares hit an all-time high earlier this month.
Meanwhile, Canada’s oldest department store brand saw its same-store sales shrink 1.3 per cent. Hudson's Bay Company also reported a net loss of $201 million as it fends off an activist investor threatening to remove its directors unless they remedy HBC’s lacklustre performance.
Marketing and brand expert Tony Chapman said the trend is a troubling one for those who cherish a vibrant in-person shopping experience. He worries the changing mix of retail outlets will spell trouble, on Main Street and at the mall, as more prestigious brands scramble to shrink the physical footprints.
“You realize what is filling that vacuum isn’t the kind of stores that we like to see,” he told CTV News Channel on Wednesday. “They’re stores like convenience stores and dollar stores.”
Montreal-based Dollarama has amassed over 1,000 locations, and has a presence in every Canadian province. Chapman said the success of the dollar store segment is unsavory, but completely understandable in his view.
“What the dollar store has done so beautifully is create what I like to call the affordable treasure hunt. I can arm my kid with $5, or I can go in there with $20, knowing that I’m going to get lots of great treasures,” he said. “There is a sense of excitement, where with Walmart I’m buying stuff that is just cheap.”
IHL cites a number of factors, including a disconnect between U.S. wages and inflation, mounting debt loads, and a shrinking middle class to support its findings.
“We really see growth in stores mostly mirroring what is going on with the incomes of consumers, more discounters, less mid-range or luxury,” wrote study authors Lee Holman and Greg Buzek. “With 50 per cent of the households having trouble keeping up with inflation, this makes perfect sense.”