Dollar Stores, Drugstores, Who's Next?
Just a few years ago, dollar stores were among the fastest-growing retail channels in the United States. Some analysts predicted they'd be a major competitor to grocery stores as they added more and more food items to their assortments. Convenience store retailers were wary of the growing sales of tobacco, beverages and other convenience items in the rapidly expanding segment.
Dollar stores, however, have fallen on hard times. Dollar Tree announced it was shuttering 1,000 of its Family Dollar stores. 99 Cents Only is closing its 371 stores. Dollar General's growth has slowed from earlier analyst projections. All this is going on at a time when dollar stores should be thriving.
In today's inflationary environment, dollar stores should appeal to budget-conscious consumers. I've got to think that low-priced supermarkets like Walmart and Aldi have hurt dollar stores. And the channel doesn't seem to have closed the gap on c-stores' huge advantages in location, convenience, foodservice, fuel, product assortment and cleaner, well-lit stores.
It was 10 years ago when Dollar Tree outbid Dollar General for Family Dollar, spending $8.5 billion for the former largest dollar store chain. Now, Dollar Tree is looking to sell off what has become an albatross around its neck.
[Read more: CSN EXCLUSIVE: Finding Opportunities in Shuttered Dollar Store Sites]
According to one former dollar store shopper quoted in a CNBC report, "They lost their focus on who exactly their customer base was." She claimed dollar store prices have risen, and they are plagued with chronic staff shortages and expired goods on the shelves. "On any given day, you had to maneuver around boxes in aisles, and items were not placed where they should be," she said.
I remember it was only a few years ago, at one of Convenience Store News' retailer roundtables, that convenience store merchants expressed concern that drugstores had emerged as a more female-friendly place for conveniently purchasing all sorts of c-store related merchandise, from cold drinks to candy and snacks, and even in some places, sandwiches.
Today, drugstores have largely abandoned some of the c-store categories — most notably, tobacco — as they've focused more on becoming wellness centers. Now, drugstore giant Walgreens is planning significant store closures. Its CEO said the retailer anticipates weaker consumer spending for the remainder of this year. The chain could close up to 25% of its 8,600 stores. Meanwhile, its chief competitor CVS has been closing stores since 2021.
The lesson for convenience store retailers is: Don't get too comfortable. Things could change quickly, as they did for dollar and drugstores. Complacency is the enemy of progress.
Smart c-store retailers are already strategizing about how to defend against the next threat to their business. What do you think that will be?
