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COLUMBUS, Ohio - Rapid new store expansion and a compelling price/value/convenience model have created a healthy outlook for the small format value retail sector in general and dollar stores in particular, reports management consulting and research firm Retail Forward in a recently released report, "Dollar Stores and Other Small Format Value Retailers".
Over the last two years, sales in the small format value retail sector have grown at a rapid pace of 10.9 percent annually, according to the report. Retail Forward forecasts more moderate growth for this industry sector over the next five years, with new store openings and same store sales gains as the key growth drivers.
However, industry sales growth is expected to moderate substantially from the double-digit pace of the last two years as new store growth slows, coming off of a larger base. Retail Forward's five-year forecast calls for sales to grow at a compound annual rate of 5.4 percent (4.7 percent after adjusting for inflation).
Growth in the small format value retail sector is also being spurred by:
-- A shift in the mix toward more consumables. This shift is resulting in higher traffic, repeat patronage, faster turns, and an increasing share of consumer preference in core consumables categories.
-- A growing consumer interest. Retail Forward's consumer surveys indicate that 32 percent of US households shop the format monthly, up from 26 percent in 1995. And, the format is becoming increasingly popular among untapped and under-penetrated shopper segments such as households on fixed incomes and ethnic shoppers.
-- A compelling business model. The small footprint fits where mass players cannot go, the compact size offers convenience over big box formats, a low overhead/low cost formula keeps prices low, and high volume offsets low transaction size.
"From a supplier perspective, the channel is fast becoming a viable and high-growth sector that is taking consumers and market share away from competitive retail formats," said Sandy Skrovan, author of the report and vice president of Retail Forward. "The channel represents an increasing number of doors in which to place products, an increasing number of eyes to see those products, and another point of contact with today's shoppers."