Variety Stores in the US

PROSPECTS

Dollar stores drive sales growth in the US variety stores channel

Even as many other store-based retailing channels in the US struggled, variety stores continued to record impressive sales growth in 2019. This was largely due to the cumulative success of the so-called “dollar store” chains – Dollar Tree and Family Dollar, which are both owned and operated by Dollar Tree Inc, and Dollar General Corp’s Dollar General.

Trouble at Fred’s, ShopKo and Family Dollar leads to slowdown in outlet growth

Over the course of the review period, variety stores in the US have shaken off talk by some industry analysts of a bricks-and-mortar “retail apocalypse” in the US by recording impressive gains in store count. In fact, variety stores’ outlet count posted the highest CAGR of any retail channel in the US over the review period.

Dollar Stores’ pivot to grocery continues

In a bid to drive up the frequency of store visits from shoppers looking to “fill in” their cupboards between weekly trips to the hypermarket, all three major US dollar store banners – namely, Dollar Tree and Family Dollar, which are both owned by Dollar Tree Inc, along with Dollar General Corp’s Dollar General – are now seeking ways to expand their grocery assortments. Though margins on food items are typically slimmer than those on general merchandise, dollar store chains believe that the increased volume of groceries sold will be large enough to offset lower margins, thanks to increased foot traffic from customers lured by expanded grocery selections.

COMPETITIVE LANDSCAPE

Dollar General builds on its lead

Dollar General Corp is undoubtedly the star performer in the US variety stores channel. The retailer has found success largely on the strength of its extensive store network across the rural US, where low population densities and lack of public transportation and – most importantly – limited competition from other retailers offer ideal conditions for the company’s outlets to thrive.

Dollar Tree Inc downsizes Family Dollar

Dollar Tree Inc operates two distinct dollar store chains in the US – its eponymous Dollar Tree banner and Family Dollar, which the company acquired in 2015. Dollar Tree is a true fixed-price store, where virtually everything is priced at USD1.

Five Below shows no signs of slowing down

2019 was undoubtedly a phenomenal year for Dollar General Corp. Although the company remained the leading variety store operator in the US by a significant margin, however, it was actually bested by a competitor in the channel in terms of year-on-year growth in both sales and outlet count – namely Five Below Inc.

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