Dollar & Other General Merchandise Stores
Description
Companies in this industry sell a variety of merchandise, including consumables and housewares, through physical retail locations. Major companies include Dollar General and Dollar Tree (both based in the US), along with Dollarama (Canada) and Poundland Group (UK).
The dollar and other general merchandise stores industry in the US includes about 40,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $75 billion.
COMPETITIVE LANDSCAPE
PRODUCTS, OPERATIONS & TECHNOLOGY
Major product categories include: candies, prepackaged cookies, and snack foods (about 10% of the industry's revenue); household cleaning supplies (about 10%); household soaps, detergents, and cleaners (about 7%); and soft drinks and nonalcoholic beverages (about 5%).
Stores in the industry range in size from 7,500 to 10,000 square feet, depending on the specific location and the size of the surrounding community. Companies use net sales per square foot as a measure of financial success. Large chains like Dollar General, Dollar Tree, and Dollar-Tree-owned Family Dollar operate thousands of stores; independent owner-operated dollar stores may have one or only a few locations. Most of the stores in the industry are leased, with increasingly long-term leasing arrangements, in some cases up to 10 years. About two-thirds of Dollar General stores are in freestanding buildings; the remainder are in strip malls.
Companies have varying strategies for which types of communities they wish to target. For example, Dollar General primarily focuses on smaller rural communities (less than 20,000 residents) for new locations, while Family Dollar is present in markets ranging from rural to more urban populations.
A typical strategy is to continually analyze the opening, remodeling, and/or closing of stores in order to maximize market share, and find the greatest efficiencies in leasing arrangements. Companies open, close, and remodel multiple stores over the course of a single year. In recent years, the amount of consumables sold by the industry has increased, which has improved store traffic, but also lowered profit margins. To mitigate reduced margins, companies must maximize efficiencies in inventory delivery and overhead expenses.
Stores are supplied directly from vendors, and through company owned or leased distribution centers; vendors typically directly supply consumable items that must be sold fresh. Large chains typically locate their distribution centers strategically so that they can reduce the number of miles traveled between the distribution center and the retail outlet, also called “stem miles.” Reducing stem miles saves costs and reduces overhead at stores.
Companies use a variety of suppliers, in part due to the range of goods offered at retail outlets. Generally, companies in the industry don’t get more than 10% of their goods from any one supplier. Many products are purchased as over-runs or closeouts, which allows companies to sell them for low prices, but also prevents them from, in some cases, establishing long-term relationships with any one supplier. Items come from both US manufacturers and from overseas. Companies may purchase products directly from another country and import them, or purchase from vendors who have imported the products. The amount of imported products in any one store can range from 10% or more. Imported goods are largely from China; profits from imported goods tend to be greater than from US goods.
The dollar and other general merchandise stores industry in the US includes about 40,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $75 billion.
COMPETITIVE LANDSCAPE
Demand is driven by consumer spending, particularly among less affluent consumers, as most companies target the lower- to middle-income demographic. The profitability of individual companies depends on their ability to effectively locate stores and to maximize their revenue per square foot. Large companies have advantages in purchasing and in negotiating lease arrangements. Small companies can compete effectively by locating in a previously untapped market. The industry is highly concentrated; The top 50 largest firms account for about 90% of the industry revenue.
Dollar stores compete not only within their industry, but also with mass merchandisers, grocery stores, drug stores, and convenience stores. Industry leaders Dollar General and Dollar Tree have moved aggressively into the convenience store arena with smaller-format stores, beverage bars, coffee stations, and grab-and-go sandwich offerings. (Mass merchants Walmart and Target have also launched smaller-format stores in urban areas that also compete with dollar stores.) Dollar stores are less affected by online competition than other retail formats because of their focus on convenience and price.
Dollar stores compete not only within their industry, but also with mass merchandisers, grocery stores, drug stores, and convenience stores. Industry leaders Dollar General and Dollar Tree have moved aggressively into the convenience store arena with smaller-format stores, beverage bars, coffee stations, and grab-and-go sandwich offerings. (Mass merchants Walmart and Target have also launched smaller-format stores in urban areas that also compete with dollar stores.) Dollar stores are less affected by online competition than other retail formats because of their focus on convenience and price.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major product categories include: candies, prepackaged cookies, and snack foods (about 10% of the industry's revenue); household cleaning supplies (about 10%); household soaps, detergents, and cleaners (about 7%); and soft drinks and nonalcoholic beverages (about 5%).
Stores in the industry range in size from 7,500 to 10,000 square feet, depending on the specific location and the size of the surrounding community. Companies use net sales per square foot as a measure of financial success. Large chains like Dollar General, Dollar Tree, and Dollar-Tree-owned Family Dollar operate thousands of stores; independent owner-operated dollar stores may have one or only a few locations. Most of the stores in the industry are leased, with increasingly long-term leasing arrangements, in some cases up to 10 years. About two-thirds of Dollar General stores are in freestanding buildings; the remainder are in strip malls.
Companies have varying strategies for which types of communities they wish to target. For example, Dollar General primarily focuses on smaller rural communities (less than 20,000 residents) for new locations, while Family Dollar is present in markets ranging from rural to more urban populations.
A typical strategy is to continually analyze the opening, remodeling, and/or closing of stores in order to maximize market share, and find the greatest efficiencies in leasing arrangements. Companies open, close, and remodel multiple stores over the course of a single year. In recent years, the amount of consumables sold by the industry has increased, which has improved store traffic, but also lowered profit margins. To mitigate reduced margins, companies must maximize efficiencies in inventory delivery and overhead expenses.
Stores are supplied directly from vendors, and through company owned or leased distribution centers; vendors typically directly supply consumable items that must be sold fresh. Large chains typically locate their distribution centers strategically so that they can reduce the number of miles traveled between the distribution center and the retail outlet, also called “stem miles.” Reducing stem miles saves costs and reduces overhead at stores.
Companies use a variety of suppliers, in part due to the range of goods offered at retail outlets. Generally, companies in the industry don’t get more than 10% of their goods from any one supplier. Many products are purchased as over-runs or closeouts, which allows companies to sell them for low prices, but also prevents them from, in some cases, establishing long-term relationships with any one supplier. Items come from both US manufacturers and from overseas. Companies may purchase products directly from another country and import them, or purchase from vendors who have imported the products. The amount of imported products in any one store can range from 10% or more. Imported goods are largely from China; profits from imported goods tend to be greater than from US goods.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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