Global Discount Store Industry
The global discount store industry has long offered price conscious consumers an alternative to more expensive and traditional retail outfits. In recent years, the economic recession and its aftermath have meant that more and more consumers have joined the ranks of the price-conscious. As the economic climate remains uncertain, consumers remain reluctant to part with their money and are more likely to hunt around for a bargain. Value for money has become a central preoccupation for today’s shopper, paving the way for growth in the discount store sector.
Competition in the global discount store industry has intensified as the various players try to undercut their rivals to attract new customers and retain existing customers with low priced goods. Product lines sold by discount stores primarily include dry goods, apparel, home furnishings, groceries, automotive parts and hardware. Grocery stores and warehouse clubs do not fall into this industry category.
- The world dollar and variety store market has been able to step in to offer cash strapped consumers cheaper alternatives in a time of economic recession. IBIS World predicts that these stores will witness strong growth over the next five-year period by focusing their marketing efforts on price-conscious consumers and low-income households.
- Obstacles to growth in the global dollar and variety store market include rivalry from big-box retailers. As levels of disposable income rises, the industry may see revenue growth decline moderately. Dollar and variety stores carry a range of general merchandise, and products are normally sold at discounted prices, attracting consumers away from higher-priced alternatives offered by department stores.
Regional Market Share
- The US discount store industry is dominated by four chains, namely Family Dollar, Dollar Tree, Dollar General and 99¢ Only Stores, reports Colliers International. These four combined operate almost 22,000 locations in the US, averaging between 7,000 and 10,000 square feet, with some newer locations covering more than 20,000 square feet. The four chains target different customers and adapt their store opening programs and merchandising strategies accordingly. Dollar stores concentrate on customer convenience when choosing locations. These discount chains use automobile counts on nearby roadways to maximize customers gained through easy store access. Another important factor to bring in new business is storefront visibility, especially in more competitive sectors. Dollar chain stores also take area demographics into consideration for site selection. In recent years, due to strong sales, dollar stores have been able to target better-quality real estate locations both in stand-alone and within strip center formats. Dollar stores have a wide range of site options in targeting lower-income or rural areas. While dollar stores will probably not venture into high-profile luxury shopping areas, they do enjoy a wider choice of sites due to increased acceptance and changing consumer attitudes towards dollar stores.
- Discount retailing in the UK recorded growth in the four-year period ending 2010 to reach almost $45 billion due to additional new consumers and higher spending on discount goods by existing customers. The UK discount store market is predicted to reach almost $67 billion in 2015, according to research from KeyNote. State austerity measures, including tax increases and cuts in spending, mean consumer confidence has not recovered from the recent economic recession, which sees a greater number of price-conscious customers opt to shop in discount stores. Discount stores will continue to face intensifying rivalry from non-discount retailers, such as the country’s dominant supermarkets.
Leading players currently operating in the global discount stores industry include Matalan, Dollar Tree, Dollar General, Family Dollar, 99¢ Only Stores, Lidl, Poundland, Primark and Aldi.
The global discount store market has fared well due to the impact of the economic recession on consumer spending patterns. However, though sales rose, dollar stores face a challenge in the form of margins, reports Colliers International. Dollar stores curb costs through expanding private label lines and increase importing as a cheaper alternative to sourcing products on the domestic market. The convenience and lower prices offered by dollar stores have won them consumers in times of economic uncertainty. It remains to be seen whether consumers will remain loyal to their new spending patterns should the economy recover fully.
Leading Industry Associations
- Intercontinental Group of Department Stores www.igds.org
- National Retail Federation www.nrf.com
- British Retail Consortium www.brc.org.uk
- International Association of Department Stores www.iads.org
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