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In a page one story this morning, the Wall Street Journal reports on the continued growth of the dollar store format in the US.

“Dollar stores are hot, and not just because of the financial strains caused by the U.S.'s uneven economic recovery,” the WSJ writes. “While they still rely on low-income households for the majority of sales, some dollar store companies are moving up the retail food chain. In particular, they are appealing to consumers from all income levels who want discount prices for everyday household goods. The success of the modern five-and-dime is the latest sign the U.S. has become a nation of bargain hunters, a shift that's causing headaches for some traditional retailers.”

The paper notes that studies suggest that while high net worth consumers are willing to spend significant dollars on luxury items such as cars and electronic equipment, they also are willing to spend time and effort seeking out the lowest prices on everyday items such as packaged foods and HBC products. It notes that a recent Retail Forward study says that “a quarter of Americans with household incomes in excess of $100,000 shopped at a dollar store at least once in the past six months.”

The number of dollar stores in the US has tripled over the past decade, and the increased sales that these units are generating are giving dollar store operators greater impact with consumer packaged goods companies. And some of the retailers are making the move into fresh food, which has the potential of making them even more of a headache to mainstream supermarkets.
KC's View:
Seems to us that in an environment like this, there are two ways to compete.

One is to assiduously go after the discount shopper.

But it may make more sense for retailers to figure out how to occupy the “this is something special” space – creating an shopping experience and carrying products that clearly differentiate it from the discounters. Doesn’t have to be upscale – but it does have to innovative with a unique sensibility.