It has been said for years now that a dollar just does not buy you that much any more. This is probably because people are just shopping at the wrong places. If you walk into a Target or Wal-Mart, chances are you won’t find much quality for one dollar. However, if you were to drop by a Dollar General Corp. (NYSE:DG), you could buy almost anything within the store.
Dollar stores have been growing at an accelerated rate over the past few years. This could be due to consumers becoming smarter with their money, the increase in the number of Americans on food stamps, or because more and more people are finding great deals and high quality products that they never knew existed. Regardless, the growth has continued and the companies in this sector are gaining strength.
Dollar stores have generic lines of products, such as Dollar General’s Clover Valley, but what most people do not know is that they also carry brand names from manufacturers like Proctor & Gamble, Kimberly Clark, Kellogg’s, Unilever, and numerous others. The generic lines are what you will find for $1, while the others are “pricier” at around $1.80 to $2.50. These prices are still cheaper than you will find at a supermarket. All of the generic products contain almost identical ingredient lists and a similar name.
Dollar General currently operates 10,000 stores in 40 states, with a large concentration in the Southeast. They have recently begun the expansion west and have an untouched market in the Northwest. This gives them plenty of room for further expansion. The map below shows their current stores. On top of the expansion, Dollar General now offers online shopping and has been adding stores with refrigerated sections to hold fresh meats, frozen foods, produce, and other grocery products. I believe this is the future of dollar stores–the more they become a one-stop-shop for consumers to stock up on products, the better. On a side note, Dollar General was added to the S&P 500 after the market close on Nov. 30, 2012.
Dollar General is the largest of the dollar stores, followed by Dollar Tree, Inc. (NASDAQ:DLTR) and Family Dollar Stores, Inc. (NYSE:FDO). Dollar Tree operates 4,451 stores in 48 states and 5 Canadian provinces. The store count is steadily rising, and should reach 6,000 in a few years. Dollar Tree is one of the only remaining stores that offers everything inside for $1. Many others have added products for a little over a dollar to several dollars, but this is not the concept they are going for; when they say it’s a dollar store, they mean it. Dollar Tree has also ramped up its website for online shopping, but they only offer items on a per-case basis. This will often deter shoppers. Unfortunately, Dollar Tree is not adding refrigerated sections to their stores, so they will miss out of the potential of that expansion.
Family Dollar currently operates 7,400 stores in 45 states. They are expanding steadily, including 58 stores having their grand openings in November and December of 2012 alone. Family Dollar has been adding stores with refrigerated grocery space, like Dollar General. Also, like Dollar General and Dollar Tree, Family Dollar has been expanding their online presence to attract computer savvy deal seekers. Family Dollar has the right plan for continued success.
