After a barnstorming year that saw the variety stores channel emerge as one of the big winners in 2020, fortunes were tempered for these retailers in 2021 year as sales growth fell back down to the low single digits. Although the pandemic did not relinquish its grip on the US, as many had expected to happen once vaccines became widely available, economic uncertainty did subside alongside a steady decline in unemployment.
Unlike many of its competitors in the variety stores channel, Five Below saw stellar sales growth in 2021. This was partly due to the company closing all its stores for two months at the outset of the pandemic in 2020 before gradually reopening most in a scaled-down operational capacity, which led to strong year-on-year growth in the first half of 2021.
In a sign of the times, Dollar Tree announced in September 2021 that it would be bumping up the price on many of its products. Historically, items sold across the chain have rarely exceed USD1, but a litany of issues have combined to drive up the cost of goods.
As variety stores continue to be squeezed by macroeconomic conditions that are causing costs to increase, some are experimenting with new store concepts aimed at consolidation and diversification. In terms of diversification, many variety stores operators have launched new banners or rebranded existing stores.
Private label strategies continue to play a key role in driving growth for variety stores, while providing a notable counterweight to inflationary pressures brought on by the global supply chain slowdown. Dollar General’s extensive private label collection spans a considerable number of product categories, enabling the company to exert greater control over the notoriously low profit margins with which variety stores operate.
As supply chain snarls across the globe have caused retailers a litany of headaches, not least of which is whether to absorb costs internally or raise prices, consumers are facing difficult decisions of their own. In 2021, inflation in the US reached a near 40-year high, affecting a broad range of categories, from vehicles to furniture.
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Variety stores are chained or independent retail outlets with a primary focus on selling a range of merchandise across several categories. Variety stores are chained or independent retail outlets with a primary focus on selling a range of merchandise across several categories, although they may also sell grocery items. Includes fixed-price stores (e.g. dollar stores) and catalogue showrooms. Example brands include Dollar General, Woolworth (Germany), and Miniso.See All of Our Definitions
This report originates from Passport, our Variety Stores research and analysis database.
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