Dollar Stores Are Taking Walmart's Lunch Money

Dollar Stores Are Taking Walmart's Lunch Money Thrifty shoppers looking for low prices on basics are frequently passing up the big boxes of Walmart (WMT) for the tighter aisles of their local dollar stores.

Chains such as Dollar Tree (DLTR), Family Dollar Stores (FDO) and Dollar General (DG) are hitting the world's largest retailer where it hurts -- in the food and pharmacy aisles. The rock-bottom discounters are revamping their stores and replacing no-name products with nationally known brands, luring in both the low-income shoppers who have been Walmart's core customers and higher-income households getting thriftier in hard times.

"Dollar stores for the past two years have put more money behind how they present consumables and fresh food to their customer base," said Brian Sozzi, retail analyst at Wall Street Strategies. "It's in dollar stores' best interest to offer an increased amount of food, in the hopes of getting a greater share of wallet." Their selections are still limited and not comparable to what a Walmart offers, but the addition of national brands helps, he noted.

Sales of those essentials have held up better through the downturn, and as cash-strapped consumers have moved to cut their spending, they've found the dollar stores quite willing to accommodate them. As Walmart pulled back last year on the number of low-price, low-margin items it was stocking to improve stores' sales numbers and boost profits, dollar stores stepped in to fill the void -- and Walmart's sales suffered.

Walmart reacted by bringing back many of the products it cut, adding displays focused on low-priced food and consumables, and launching promotions for everything from apples to turkey trimmings. But it's having a hard time luring those shoppers back. While Dollar Tree's comparable store sales (for stores open at least a year) were up 9% in the latest quarter and Family Dollar's were up 8%, Walmart's were down 1.3% in the U.S., along with store traffic; Dollar General is expected to report a solid quarter next week.

Gaining Ground With Higher-Income Shoppers

"Dollar General is not the place it was two years ago," CEO Rick Dreiling told analysts earlier this year. During 2010, it has added national brands including L'Oreal cosmetics and Heinz foods, part of an overhaul of the company that followed its public offering in November 2009. Older stores are being revamped and new ones have opened at a fast clip.

And as the overhaul continues, it's becoming easier to attract national brands and shoppers. The company's fastest growing customer segment comes from households making more than $70,000 a year, Dreiling told the analysts.

Walmart has not been idle, though. While discussing the disappointing sales numbers with analysts last month, Bill Simon, president of Walmart U.S., said the company will step up its initiatives aimed at its core customers -- households making under $70,000 a year.

"Whether it's for everyday groceries, or for discretionary items, Walmart U.S. will be the price leader throughout the holidays," vowed CEO Mike Duke.

However, Walmart does appear to be losing the pricing edge against the dollar stores and supermarkets. A November spot check by Credit Suisse First Boston analysts noted the price of a basket of 60 common products was 1.3% higher than the same time a year ago. And the difference between Walmart's prices and those at rivals such as Target Stores (TGT) and supermarkets had shrunk to its lowest level since 2007, before the start of the recession.

Pendulum Will Swing, and Dollar Stores Will Adapt


But don't count Walmart out, says Kevin Regan, senior managing director of FTI Consulting. Even if the shoppers' newfound liking for dollar stores carries over to the economic recovery, Walmart's merchants are skilled at balancing prices and profits to draw shoppers in, he said.

"Walmart is a sleeping giant and they realize their productivity has slipped," he said. Walmart has the advantage of having both the national brands the dollar stores have and private labels that are well known to shoppers, he said.

For their part, the dollar stores have co-existed with the big boxes for decades, often in the same malls, said Regan. They even complement each other, with Walmart being the one-stop, once-a-week destination, and the dollar store the source of fill-in shopping during the week, he said.

Once the sleeping giant regains its footing, the dollar stores will adapt, as they have before, Regan believes. Dollar store chains have grown large enough -- Dollar General has nearly 9,000 stores, Dollar Tree over 4,000 and Family Dollar over 6,800 -- to leverage their scale to compete against Walmart without hurting profits, he explained.

"If Walmart becomes aggressive, it will impact [dollar stores] for some time, and they will come up with a counter-strategy," Regan said. "The reason they have survived for 40 to 50 years is they have been good about changing strategy."

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

569 Comments

Filter by:
fvgvfsbvgbf

welcome to :

===== http://www.bsafebiz.com ======

U-GG Nightfall Boots

U-GG Coquette Slipper

U-GG Sundance Limited Edition

U-GG Classic Argyle Knit

U-GG Bailey Button Boots

U-GG Classic Cardy Boots

U-GG Classic Tall Boots

U-GG Classic Short Boots

U-GG Ultra Tall Boots

U-GG Classic Tall Metallic

U-GG Sundance II Boots

U-GG Ultra Short Boots

U-GG Classic Mini Boots

===== http://www.bsafebiz.com =====

★∴
▍▍
   ....▍▍....█▍ ☆ ★∵ …./

   ◥█▅▅██▅▅██▅▅▅▅▅ ███◤

   .◥█████████████ ██◤

 ~~~~◥████████████ █◤~~

~~

March 25 2011 at 10:17 AM Report abuse rate up rate down Reply
ScarletPaz

With gas prices being what they are. It really depends on how close you live to a WalMart. I'm about 12 miles from the nearest WallyWorld and about 2 miles from a Family Dollar and a Dollar General. We also have a salvage grocery close by.
I dislike WalMart simply because they play with the prices. Do not shop with out a calculator and a price book.
Price wise, Dollar General will beat WalMart on certain things. Coffee for example the Clover Valley Morning Blend sold at Dollar General is $4.75 fora 33-oz. can. That's $2.40/lb. WalMart's best price $3.44/lb.
Dollar General's all-purpose flour 5lb.bag $1.75. WalMart $2.28.
Dollar General Clover Valley Ranch Dressing 16-oz. $1.00. WalMart $1.22. Watch WalMart on this as the larger size 36-oz bottle is $2.98..do the math, its actually cheaper to buy the small one.
That's just a sample, but Dollar General or Family Dollar either one are almost always within a few cents of the prices WalMart is charging.
I didn't believe it until I started writing down prices and comparing. Its been 6-months, and I've been to WalMart once.
Sam's Club I'll visit around every 6-weeks for dog food, and butter, and maybe two other items that they're cheaper on. There again, their prices need to be checked.
:) Shop Sam's at lunch time and eat for free, since they set up all those sample stands and feed you. Love that.

March 11 2011 at 2:36 PM Report abuse rate up rate down Reply
shirley

Walmart stores are not as cheap as they used to be,and they are not very clean. I shoped in a super target store,and most of the food prices are very good,and it is a very clean well orgsnized store. I found it s great store to shop in and I will not go to Walmart again,even though Target is a longer ride to get to.

March 10 2011 at 11:28 PM Report abuse rate up rate down Reply
Ridemyrod53

I think walmart sucks. Has big as they are are they still can offer there people better money. And more hours then part time. Why don't are goverment go after them for more taxes and lower prices. Instead are country let them build in other countries. Just like the big GM plant they are building in china. And Ford going to build a big plant in Russia now. Ther goes more of are jobs here. Oboma is running this country under a consperesee. And send all of are big money over seas to the country he really works for.

February 21 2011 at 8:19 AM Report abuse +1 rate up rate down Reply
rreggieveggie

I WOULD'T GO ANY WEAR ELSE BUT WAL-MARTS I'V WALKED IN OUTHER STORSE AND HAD TO WALK RIGHT OUT. PRICES WERE SO HIGH. I HAVE BEEN TO THE DOLLAR STORES AND A LOTE OF STUF IS HIGHER. THEEIR WOULD BE A IOT MORE PEOPLE GOING HUNGRY IF THEIR WAS NOT A WAL-MARTS. AND EVERY THING AT DOLLAR STORES ARE MADE IN CHINA. AND NO STORE WILL TAKE BACK ANYTHING AFTER 30 DAYS UNLESS IT IS THE STORE NAME LIKE SEARS AND SOME THINGS THEY WILL NOT TAKE BACK. GET ON THE INTERNET TO FIND OUT WHAT PET FOOD IS THE BEST TO BUY THEIR IS ALOT OF NAME BRANDS THAT WILL SLOLY KILLYOR PET.IF I HAD THE MONDY TO GO TO ITLY I COULD AFORD TO SHOP SOME WEAR ELSE. BOY IF A STORE HAS 1000 PEOPLE A DAY OR MORE USING A CARD (WOO--)

December 09 2010 at 8:28 PM Report abuse rate up rate down Reply
stlboxmaker

I am tired of the times Sams and Walmart stops you on the way out. They do not have signs up saying they are going to check carts. My opinion is once I pay at the register what is in the cart is mine not Walmarts or Sams. I seldom walk into one of these stores because of this.

December 09 2010 at 7:27 PM Report abuse rate up rate down Reply
define3009

Since I bought Delmonte "Special Kitty" for my cats at Walmart and it turned out in it was the Melanine from China, that was in it, and seing them all die long slow deaths, I won't buy Special Kitty. But now it is the same Special Kitty but put in Walmart cans. The shock was so bad. Also, my SILK soy milk is more expensive that Publix so that isn't a lure to go to Walmarts any more. I like Dollar Tree and find they have very good prices.

December 09 2010 at 7:22 PM Report abuse rate up rate down Reply
atiger57

It's good but do you realize that Family dollar charges $1.00 to use a debit card for purchases without signage to that effect. Employee told me they have been doing it for a while and if you don't see it on the P.O.S. they don't say anything

December 09 2010 at 12:17 AM Report abuse rate up rate down Reply
DawnellDaugherty

If you want to feel like a ba...rd child,then shop at Walmart.I guarantee once you do, You will walk funny the rest of your life!!!!!

December 08 2010 at 9:47 PM Report abuse rate up rate down Reply
tycoon

If walmart has any hope of getting my business back, it will stop the crap-on-the-customers practices it uses, including: Phony shelf signs claiming product prices have been reduced when they haven't been or when they've actually been increased. Consistently letting stock run out, including items that should never be allowed to run out. Not hiring or training department manages who know how to manage their department's inventory. Giving two incomplete receipts, one on the back and one on the front, while telling customers the lie that it saves money ("a 100-thousandth of a dollar or nickel really adds up worldwide") when in fact the paper (and ink that wouldn't have been wasted) is wasted on advertising and phony contest promises in exchange for no-pay survey requests--advertising that the vast majority of customers neither look at nor want to receive. Continuing its policy of no service when products expected by customer can't be found. Clogging the aisles with pallect jacks and blocking customers. Forcing customers to walk up to an extra block to their cats be blocking exits during business hours. Stocking food in its deli's that make people sick. It's time for Walmart to go back to what made it successful and stop trying to take advantage of its own best customers. I go out of my way, now, to avoid entering our new, local walmart superstore. They're turning into just another K-Mart when it was at its worst. Used to be a fine store chain; now fading fast. Time to stop trying to take over the world,walmart.

December 08 2010 at 3:42 PM Report abuse -1 rate up rate down Reply