The North American retail landscape is going to look a lot more cheap and cheerful as dollar stores occupy more of the brick-and-mortar spaces abandoned by up-market rivals.
The rise of the dollar store appears to be part of a broader resurgence in physical retail that clashes with long-held assumptions about powerful e-commerce players like Amazon鈥檚 impact on traditional shopping habits.
A recent study by global research and advisory firm IHL Group suggests large U.S. retailers will open 4,080 more locations than they close this year. That figure is projected to rise to more than 5,500 in 2018. IHL found 46 per cent of the expansion among the top 16 fastest-growing brands was driven by just two U.S. chains -- Dollar General and Dollar Tree.
The study, titled 鈥淒ebunking the Retail Apocalypse,鈥� reviewed more than 1,800 U.S. retail chains that have 50 outlets or more.
Dollar store dominance is a trend that is playing out in Canada as well. Dollarama鈥檚 same-store sales, a key measure of retail success, jumped 6.1 per cent in its second quarter over the same period last year. The company鈥檚 Toronto-listed shares hit an all-time high earlier this month.
Meanwhile, Canada鈥檚 oldest department store brand saw its same-store sales shrink 1.3 per cent. Hudson's Bay Company also reported a net loss of $201 million as it fends off an activist investor threatening to remove its directors unless they remedy HBC鈥檚 lacklustre performance.
Marketing and brand expert Tony Chapman said the trend is a troubling one for those who cherish a vibrant in-person shopping experience. He worries the changing mix of retail outlets will spell trouble, on Main Street and at the mall, as more prestigious brands scramble to shrink the physical footprints.
鈥淵ou realize what is filling that vacuum isn鈥檛 the kind of stores that we like to see,鈥� he told 麻豆影视 Channel on Wednesday. 鈥淭hey鈥檙e stores like convenience stores and dollar stores.鈥�
Montreal-based Dollarama has amassed over 1,000 locations, and has a presence in every Canadian province. Chapman said the success of the dollar store segment is unsavory, but completely understandable in his view.
鈥淲hat the dollar store has done so beautifully is create what I like to call the affordable treasure hunt. I can arm my kid with $5, or I can go in there with $20, knowing that I鈥檓 going to get lots of great treasures,鈥� he said. 鈥淭here is a sense of excitement, where with Walmart I鈥檓 buying stuff that is just cheap.鈥�
IHL cites a number of factors, including a disconnect between U.S. wages and inflation, mounting debt loads, and a shrinking middle class to support its findings.
鈥淲e really see growth in stores mostly mirroring what is going on with the incomes of consumers, more discounters, less mid-range or luxury,鈥� wrote study authors Lee Holman and Greg Buzek. 鈥淲ith 50 per cent of the households having trouble keeping up with inflation, this makes perfect sense.鈥�
