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.
SoFi Member Stories: Luis
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Google’s CEO and Australia’s Prime Minister Discuss Potential New Law
A New Bill Could Require Tech Companies to Pay Australian News Outlets
Google (GOOGL) CEO Sundar Pichai and Australian Prime Minister Scott Morrison met yesterday to discuss a contentious bill which was introduced in Australia’s parliament in December. The bill would require platforms like Google and Facebook (FB) to pay Australian media outlets to use their content in search results or news feeds.
For context, Google’s estimated value is over $1 trillion—equivalent to about two thirds of all of Australia’s annual GDP. Google currently controls over 94% of the search engine market share in Australia.
Debates Between Publishers and Big Tech
Google has voiced concerns about the proposed bill in Australia, saying it would give Australian news companies an unfair advantage. Last month the search engine threatened to stop providing service in Australia if the bill became law. Facebook also said it would no longer allow Australian users to share news articles on the platform if the bill was passed.
Google, Facebook, and other services benefit from the use of articles and other media on their sites. These links draw users to social media platforms and search engines, and this generates ad revenue. Media outlets argue that this is unfair and they should get a cut of these profits. Google and Facebook say that the setup is mutually beneficial, and that their platforms direct traffic to publishers’ websites.
Last month Google reached an agreement with French publishers surrounding similar issues. It appears that after yesterday’s discussions between Pichai and Morrison, some form of a deal will be reached in Australia and Google will likely not pull out of the country entirely.
Few details were released about the talks, but Morrison described the discussions as “constructive” at a press conference yesterday. Investors, as well as citizens in Australia, will be eager to see how negotiations unfold.
Friday Fundings: Vivino, Zetwerk, and Good Eggs
Vivino Raises Funds for Wine Recommendations and Sales
Vivino, a wine recommendation app, recently secured $155 million in a Series D round led by Kinnevik with participation from Sprints Capital and GP BullHound. The company has raised $221 million to date.
Vivino allows users to scan wine bottles or wine menus to learn more about them. The app also partners with wine distributors, giving people the opportunity to buy recommended wines directly. Ecommerce alcohol sales have boomed recently. Over the past two years, Vivino’s user base has grown from 29 million to 50 million.
Vivino is not the only alcohol-related app gaining attention from both consumers and investors. Drizly, another pioneer in the online alcohol sales industry, saw its sales rise by 350% last year. Earlier this week it was announced that Uber (UBER) will acquire Drizly.
Zetwerk Raises $120 Million as Manufacturing Moves to India
Zetwerk is a startup based in Bangalore which sells custom-made parts for machines ranging from cranes to medical devices. These parts can often be extremely difficult to find and purchase, so Zetwerk helps streamline the process. The company services a variety of industries, from aerospace engineers to apparel manufacturers.
Zetwerk recently secured $120 million in Series D funding led by Greenoaks Capital and Lightspeed Venture Partners. Many companies are currently moving their manufacturing operations from China to India, which Zetwerk believes will help its customer base grow. With its new funding, Zetwerk will be able to meet rising demand for its services.
Good Eggs Raises Money for Specialized Grocery Delivery
Good Eggs, a grocery delivery startup, recently raised $100 million in fresh funding. The round was led by Glade Brook Capital Partners with participation from GV, Tao Invest, Finistere Ventures, and other investors. The startup is currently focusing on the San Francisco Bay Area, but with the new funding it plans to begin operating in Southern California.
Though the grocery delivery space is very crowded, Good Eggs stands out because 70% of its products are sourced locally. Groceries from Good Eggs are often delivered within just a few days of being harvested.