Regulation

Dollar Stores' Gain Is Traditional Grocery's Loss

As Dollar Stores of all stripes are increasing a booming business, analysts and experts are beginning to wonder if "big grocery" runs the risk of being the "big loser" in the equation.

Growth in the dollar store segment has been fast, particularly in the last five years of the soft recovery. According to data reported in Forbes, the top four chains saw total annual sales grow from $28 billion to an estimated $42 billion. That adds up to a compounded annual growth rate of 8.5 percent.

The biggest growth areas for dollar stores are grocery items - food, tobacco, health and beauty and household paper and cleaning products. The top four chains have been able to increased their combined annual grocery category sales by a little over $10 billion from 2010 through 2015, from $18.3 billion to around $28.6 billion.
That rapid growth could be taken as alarming for traditional grocery retailers because those sales have to be coming from someplace, though there are a few grains of salt with which to take the growth numbers.
Though $28.6 billion is a large number, $1 trillion is a much larger number. It is also the total value of grocery sales in the U.S. in 2015, according to Euromonitor International. That means for all of the Dollar Store's rapid growth, it is jumped to a 2.9 percent share of the grocery sector in 2015 from a 2.0 percent share in 2010.
On its own, Dollar Stores aren't a segment killing threat.
But ...
Dollar Stores are one of many emerging niche players in the field that are attacking the big centralized grocery chains of late, supplanting that traditional experience with a different tangible benefit for consumers. Dollar stores trade on price, Amazon and Instacart on convenience, and Aldi-owned Trader Joe's on price + unique selection.
All those niche markets taken together may — and in some areas are — eat away at the big grocery chains which are in turn having to modify their approach to customer retention and acquisition.
So are Dollar Stores killing grocery stores? No. But they are one of many forces exerting big pressure on them.
By the numbers that is looking increasingly likely.

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