Merchant Innovation

Is Dollar Retail The Future Of Online Impulse Buys?

If brick-and-mortar merchants can claim anything sacred from the total encroachment of online retail on its turf, it’s the highest echelon of uber-luxurious commerce. Online brands have yet to figure out a way to offer mimosas while personal stylists or designers do their jewel-encrusted work, and while there are more than a few startups trying to replicate an equivalent experience, a growing number are realizing that they might not need to at all.

That is, if the current trend toward dollar shopping holds — both in-store and online.

The first pieces of evidence come from recent earnings reports from two of the biggest tentpoles in the dollar retail category: Dollar General and Dollar Tree. Both reported increases in both sales and customer traffic to their in-store locations, with the former claiming a 7 percent rise in year-over-year sales for a $5.3 billion total. Alongside this demonstrated growth, Dollar General CEO Todd Vasos explained on an investors call that his low-cost brand isn’t going to sit on its numbers and hope that they continue to roll in. Instead, it is re-outfitting stores, opening up new locations and starting new product lines to capitalize on this surge in affordable interest.

“Our ongoing affordability initiative is front and center, with an expanded $1 offering, including a greater selection of national brands,” Vasos said. “Increased penetration of national brands at the $1 price point gives us the opportunity to increase trial with our consumers, which leads to brand acceptance. Acceptance drives loyalty, which tends to encourage trade-up over time. Currently, nearly 60 percent of our baskets contain a $1 item or less.”

Every company has their good quarters and their bad quarters, but a few stars have aligned to spell out a horoscope that this might not be a blip on the radar for dollar stores. First, what dollar stores’ full-priced counterparts have long blamed for their own profit failings — warm winters, rainy, unseasonable springs and a poor economy — have proven to either be ineffective with or positive for the dollar store category. It would be tempting to call this a temporary shift, but until the Macy’s of the world can put a definitive stamp on what’s been ailing them, aside from the shifts of the seasons as well, then what choice is there but to ride the wave?

It seems as if online shoppers are riding it just fine, at least according to the digital frontier’s shining example of eCommerce on the right kind of cheap, Hollar. Not much more than a dollar store with its aisle transformed into clickable tiles, Hollar lists items under $5 as a general rule. Free shipping, of course, is available for purchases of $25 and above, and former Honest VP David Yeom is confident that the word of mouth of the site, along with $12 million in Series A funding, can keep the dollar retail surge going well into the online future, despite its low-rent reputation.

“It’s amazing an industry this big is not very talked about,” Yeom said. “It definitely suffers from some perception and stigma … but 80 million people shop at these places. When you talk about massive scale, that’s what this industry is all about.”

Hollar is even moving forward with its own line of private-label goods, as if selling others’ wares on the cheap wasn’t working well enough.

You don’t have to listen to those benefiting from the rising tide of dollar shopping. Even the old guards of high-priced luxury — Tiffany, for example — is feeling the ebb to Dollar General, Dollar Tree and Hollar’s flow. Neil Saunders, Conlumino CEO, confirmed to Reuters that millennials don’t seem to be biting at the bait of the brand’s traditional value.

“The brand is not seen very negatively, but it is seen as being somewhat tired and traditional,” Saunders said. “Younger consumers especially see it as a place that is for the older generation and for a different era.”

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