Dollar Stores Now Outnumber Chain Drug Outlets

Articles
December 15, 2011

Dollar Stores Now Outnumber Chain Drug Outlets

The combined store count of the four major dollar store chains – DOLLAR GENERAL, DOLLAR TREE, FAMILY DOLLAR and 99 CENTS ONLY – now outnumbers the three largest national drug store chains - WALGREENS, CVS and RITE AID), according to COLLIERS INTERNATIONAL’s Dollar Days: How Dollar Stores are Growing in a Weak Economy study, reports The Food Institute.

The combined store count of the four major dollar store chains – DOLLAR GENERAL, DOLLAR TREE, FAMILY DOLLAR and 99 CENTS ONLY – now outnumbers the three largest national drug store chains - WALGREENS, CVS and RITE AID), according to COLLIERS INTERNATIONAL’s Dollar Days: How Dollar Stores are Growing in a Weak Economy study, reports The Food Institute. The four dollar store chains account for 21,500 locations in the U.S. Most dollar stores are sized between 7,000-sq. ft. and 10,000- sq. ft., though there are exceptions. Some newer prototypes are larger than 20,000-sq. ft.

The success of dollar stores can largely be attributed to how they reacted to the economic downturn and increasingly price sensitive consumers that are seeking value. The segment boosted its food offerings, leading shoppers to frequent the stores more often. Remodels have also helped drive traffic and boost consumer sentiment. Increasing consumer frequency and cache caught the attention of landlords; dollar stores are now a “more accepted tenant” than in the past. As a result, dollar stores are moving into better real estate locations impacted by economy-driven vacancies. Chains are also building ground-up locations.

Experts believe the segment has much potential. “The convenience they provide – bringing better products at lower prices closer to the consumer – helps dollar stores to better serve existing customers and attract new ones. Retail is habit forming; the longer shoppers patronize a particular store or category, the more likely it is to become a permanent shopping destination,” outlined Ann Natunewicz, national manager of U.S. retail research for Colliers International.

The real estate is available for dollar stores to further expand, as the current U.S. retail vacancy rate is 7%, according to JONES LANG LASALLE’s North America Year-end Retail Outlook. Open-air shopping centers have 10.9% vacancy and general retail has 4.7% vacancy. New York and San Francisco continue to be the healthiest markets, with vacancy levels of 2.1% and 3%, respectively, while Atlanta and Dallas show the largest vacancies at 10.2% and 9.1%, respectively. The move towards smaller, more efficient store footprints in population dense urban areas continues.