The Rise of the Discount Store
The Pandemic Accelerates a Trend
During a time when most brick-and-mortar retail stores are struggling, discount stores around the world like Dollar General (DG) in the US and B&M in Europe are expanding. These stores have been gradually gaining popularity for over a decade, but the pandemic has driven rapid growth for discount retailers.
During the financial crisis of 2008, many higher-income people began to embrace budgeting and discount shopping. These habits stuck around even when the economy regained strength. In 2018 90% of Americans making $50,000 to $100,000 said they shopped at dollar stores and discount retailers. Now, because of the current economic downturn, even more shoppers are flocking to discount retailers.
Discount Stores Expand While Other Retail Stores Close
According to recently released data, 40 large US retailers declared bankruptcy in 2020. There were more than 11,000 physical store closures in the US last year, which is up from 9,300 in 2019.
Meanwhile discount stores have significantly expanded during the pandemic. Dollar Tree (DLTR) and Family Dollar added 500 new locations last year. Dollar General, which specializes in rural markets, launched about 1,000 new stores in 2020. Combined these companies were responsible for almost half of all new store openings in the US last year. Dollar General says it will open an additional 1,050 stores in 2021.
Dealing With the Ecommerce Boom
The pandemic has driven more consumers than ever to shop online—a trend which has battered traditional retailers. But dollar stores are making it through the ecommerce boom relatively unscathed.
Because these stores’ products are so cheap, margins on ecommerce sales are slim. Some discount stores are working to develop ecommerce operations for some of their more expensive products, but leaders in the industry believe that discount retailers can offer a bargain hunting experience that is nearly impossible to replicate online. For that reason, dollar stores are confident that, even as ecommerce gains ground, consumers will continue to come through their doors for discounted goods—as well as the “treasure hunt” experience of shopping for those goods.
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