CSN EXCLUSIVE: Finding Opportunities in Shuttered Dollar Store Sites
NATIONAL REPORT — Although the convenience store industry has seen some ups and downs in 2024 — Foxtrot was dead until it wasn't, Mega Co-op cut ties with Holiday Stationstores but will exit bankruptcy, and The Store is slated to shut down at the end of the month — other retail silos have been rocked by equal amounts of sudden wind changes.
In the dollar store sector, the industry experienced two major losses earlier this year. 99 Cents Only Stores ceased all operations, shuttering nearly 400 locations, and Dollar Tree Inc. announced it would close 1,000 Family Dollar stores over the next 24 months, contracting quite a bit from when it led the way in store openings just a few years ago.
Despite the upheaval, dollar stores remain a competitive force in the brick-and-mortar sector, according to Sujeet Naik, an analyst with Coresight Research covering the U.S. grocery/mass and convenience store industries.
"Dollar stores are among the top performers in U.S. store-based retailing," he said. "Their cost-effective business models, strategic expansion plans and ability to adapt to evolving consumer preferences make them strong competitors in the retail industry."
He points to forays into the grocery sector as one way dollar store retailers have remained relevant in a rapidly changing market. However, many of the same pressures other retailers have been facing over the past few years have started to affect dollar stores' bottom lines: increased shrinkage; geopolitical tensions between the United States and China, which affects the significant amount of store inventory that originates abroad; and growing social activism stigmatizing dollar store openings. Not to mention, of course, inflation.
"[Inflation has] pressured the companies' low-income consumer base which, in turn, has reduced their discretionary spending," said Naik. "Dollar stores rely on keeping everything at a dollar or a similar low price, but inflation is making it harder for them to stock shelves with the same variety of items at those prices."
According to a Los Angeles Times report, those rising costs likely contributed to 99 Cents Only's demise, while a combination of inflation and mismanagement led to Family Dollar’s upheaval, as reported by CNN.
Filling the Void
Even with both closing announcements happening so close together, Naik doesn't foresee the moves as the beginning of a trend.
He does posit that the contraction in spending will likely remain a long-term change and though this could eventually boost discounters' sales as consumer patterns adjust, c-stores may find openings for themselves in regions that dollar stores have departed from.
"Both convenience stores and dollar stores … attract busy individuals on the go who need to grab something fast," Naik said. "Customers who shop at both are likely to show similar shopping behaviors, such as making frequent, small purchases and looking for immediate solutions to everyday needs."
Marketing and outreach can help quite a bit if a c-store retailer is looking to bring former dollar store shoppers into its locations. Naik suggests convenience retailers would be best served by highlighting their similarities for consumers who may have suddenly found their preferred dollar store disappearing.
C-stores also should look at adjusting their inventory slightly, especially when it comes to household goods. Providing a wider selection of items combined with bundled deals or two-for-one specials may bring in customers who wouldn't normally think of a c-store as a location to pick up their regular hand soap or sponges.
Convenience retailers can capitalize on the physical space left behind by dollar stores as well. However, before moving into any opening left by a dollar store closure, c-store operators should still perform their usual due diligence.
"[A] convenience store owner must analyze the surrounding area thoroughly," Naik said. "Was the dollar store closure indicative of a lack of overall demand or some other reason, such as increase in theft? Look for these signs and other reasons, such as a growing population or changing demographics that might favor a c-store's offerings."
He also suggests operators check on the physical location itself before deciding what will be most cost effective. While some former dollar store sites might have the wrong square footage or poor upkeep or just not enough foot traffic, others may still be cheaper to retrofit over building an entirely new c-store.
An old location can offer the benefit of familiarity, too, with an existing customer base already acquainted with the site. But, Naik stated, it will still be up to the new c-store to reach out to the local community to introduce itself.
"Organize events such as product samplings, giveaways or family-friendly activities to introduce the … brand and create buzz within the community," he said. "Highlight features like extended hours, fuel options if applicable and prepared food offerings."
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