At one time, upper- and middle-class shopping centers turned up their noses at dollar stores, assuming that their presence would hurt the image of neighboring retailers, as well as the area as a whole. In pre-recession days, many shoppers shunned dollar stores too, preferring to pay more at supermarkets, drugstores, and big box chains for goods of presumably better quality. My, how times have changed.
Over the past few years, arguably no retail faction has experienced as much success as dollar stores. Dollar General has just about doubled its number of locations in the past decade. There are now more than 9,800 Dollar General stores nationwide, making it the country’s largest retailer by location count. Dollar Tree opened its 4,000th store in 2010, after hitting the 3,000 mark four years ago. Family Dollar, meanwhile, has about 7,000 locations in North America, and expects to add 450 to 500 more this fiscal year.
The study, from research firm Colliers International, indicates that dollar stores have gone mainstream and become more acceptable, even in relatively upscale shopping areas.
Dollar stores are becoming a more accepted tenant and are moving into increasingly better real estate locations impacted by economy-driven vacancies. Landlords in smaller markets often lease to a predominantly local tenant mix, so adding a large, national credit tenant can reenergize a leasing effort and reassure lenders of a property’s viability.
Landlords have grown especially likely to rent to discount retailers as the Blockbusters and Circuit Citys of the retail world have shut their doors. Almost any tenant—even a dollar store—looks better than an empty storefront. Based on sales figures by dollar stores, in which 10% annual growth seems commonplace, dollar stores are solid tenants lately.
The downturn of the economy has obviously played a role in the dollar store boom. In a TIME/Money survey released last fall, 45% of respondents said they’re more likely to shop in discount and dollar stores, versus 38% in 2009.
The convenience of dollar stores, which are probably closer to home and definitely more manageable than sprawling supermarkets and retail warehouses, is also a factor. A SmartMoney column explains:
Folks are so broke and so busy that they can’t afford the gas and time required to shop big-box discounters on the edge of town. Your typical dollar store, meanwhile, is close to home and a tenth the size of your average Wal-Mart. Most shoppers spend just 10 minutes and 10 bucks in the store. In 2012, this is how we prefer to shop.
There’s also the perception that today’s dollar stores are just plain better than the dollar stores of the past. That was the case made recently by a New York Times writer, who rehashed his experiences using dollar stores to outfit almost every part of his home, from spices in the kitchen to bubble bath in the bathroom.
On some level, every retailer lives and dies by its ability to entice shoppers into making impulse buys. This is especially the situation at dollar stores, per an expert quoted by the Minneapolis Star-Tribune:
“Dollar store success depends on the power of the spontaneous purchase,” said Andrea Christenson, vice president at Cassidy Turley, a Minneapolis-based real estate firm. “You may not need anything going in, but you develop a need once you’re inside.”
When the economy turns south, it’s much easier for consumers to make an impulse buy if it only costs $1, or just a few bucks. Hence, another reason why dollar stores thrive while other retailers struggle.