BLOG 05.20.13

Today, the venerable U.S. “dollar store” might be inclined to ask, “We’ve been here all along; where have you been?” The tough economy has compelled some shoppers to stop driving to big-box retailers for everything they need and to take a shorter jaunt down to the neighborhood Dollar General, Family Dollar or Dollar Tree for – increasingly everything they need.

In the past, shoppers have used dollar stores more sparingly – for stock-ups, household emergencies and during short-lived tough times. Today, as their official financial figures show, these stores are pulling in more shoppers more often, and borrowing from the big boxes’ strategies, too.

Dollar General showed its biggest gains in the second quarter this year in its growing consumables offerings, including snacks, candy, packaged goods and even perishables. Dollar Tree has been boosting its own private label brands, as has Family Dollar, which has added hundreds of SKUs to its Family Gourmet and Kidgets lines, among others. It announced in July that its private label revenues were up 22 percent over the same period in 2010.

Berkshire Hathaway chairman Warren Buffet liked what he saw in Dollar General so much that his company bought $50.8 million in its stock this summer, at the same time he was divesting in a major global packaged goods producer.

Dollar stores “really have become a resource for more than they used to,” says William McCann, Director of Strategic Planning at Schawk Retail Marketing. “They were never a destination in the past; now they’re a part of the community. You can count on their private label products being in stock, you don’t have to hunt and forage. And at a dollar store, often the private label brand IS the top brand, and it’s trying to look advanced, applying naming and design conventions that say, ‘Yes they’re a private brand but not bought at a dollar store.’”

The aggressive moves of dollar stores surely reflects a desire to be well-positioned when the economy recovers. Some analysts predict their customers will be permanent converts, while others feel shoppers will automatically gravitate back to big boxes when their financial situations improve and the convenience of true one-stop shopping trumps price.

Time will tell. In the meantime, it seems like change is on everyone’s mind, even if only theoretically. In a recent column, The Washington Post’s George Will suggested that the U.S. should hand postal service to the private sector, “which probably could have a satisfactory substitute system functioning quicker than you can say ‘FedEx,’ ‘UPS’ and ‘Wal-Mart.’” Whether the largest employer in the U.S. (Wal-Mart) is interested or not, you can bet that like dollar stores it’s thinking hard about how it’s positioned for when the economy is back in full swing.