Showing that many Americans are still pinching pennies, the largest dollar store chains are planning to open more new stores nationwide in 2014 than they have in any year since the economic recession started.
Dollar General Corp., which operates 11,061 stores in 40 states, wants to open 700 more of its yellow-signed stores in the coming year, including one under construction on East Home Road in Springfield. The retailer is also seeking approvals for a store planned on South Yellow Springs Street, said company spokesman Dan MacDonald.
Plans are to also remodel or relocate another 525 stores nationally, MacDonald said.
This past year, Goodlettsville Tenn.-based Dollar General opened 650 new U.S. stores, including 58 openings in Ohio. Among them was one at 1660 Moorefield Rd. in Moorefield Twp. There are now 771 Dollar Generals statewide.
Dollar General’s growth has accelerated since the start of the so-called “Great Recession” in Dec. 2007. The first full year of the downturn in 2008, the retailer opened 450 new stores, MacDonald said.
“Our business model is solid in good times and bad and is probably more relevant to customers when times are bad,” he said.
Competitor Family Dollar Stores Inc. runs 8,000 storefronts in 46 states including 474 locations in Ohio, said spokesman Josh Braverman. Plans are to open 525 more stores and close 80 locations nationally in fiscal year 2014. The company’s fiscal year started in September.
That compares to 500 store openings for fiscal 2013. In fiscal 2012, Family Dollar opened 475 stores, including one on Selma Road in Springfield.
By comparison, 180 new Family Dollars opened between September 2008 and August 2009 in the U.S., according to Braverman.
Meanwhile, Matthews, N.C.-based Family Dollar is also undergoing a major renovation of stores — 800 were remodeled last fiscal year, and another 800 remodels are planned this year, Braverman said.
Coolers and frozen food sections are being added to renovated locations, he said.
“Over the last few years we’ve really put a lot of emphasis on improving our assortment in our food category,” he said.
Dollar General this year introduced tobacco products, a move Family Dollar made the year before.
Similarly, Dollar General is also offering more frozen and refrigerated food items including frozen vegetables, frozen meals, eggs and milk in stores as it adds cooler doors, MacDonald said.
In 2003, Dollar General introduced a new format that sells produce and meat. Dollar General Market, as the concept is called, opened a Mason location in 2007.
Dollar stores negotiate prices of stocked items with vendors. These discount stores also tend to spend less on advertising to keep prices low.
Prices at Dollar General for the same item tend to be 30 to 40 percent cheaper than a typical drugstore, and 15 to 20 percent cheaper than a standard grocery store, MacDonald said.
Most of Dollar General’s items are priced below $10, with about 25 percent of goods selling for $1 or less. Family Dollar’s average transaction is about $10, with about 30 percent of merchandise priced at $1 or less, according to the companies.
Family Dollar says its average customer is a female head-of-household in her mid-40s earning $40,000 a year.
Seventy percent of Dollar General stores are in communities with populations of less than 20,000, according to the company. Family Dollar in the past has looked to open in strip shopping centers, in urban and suburban areas. Now Family Dollar prefers to build new stores to suit, company officials said.
By the end of 2011, dollar stores in the U.S. had outnumbered drugstores, according to research by Ann Natunewicz, vice president of retail services for commercial real estate firm Colliers International, in San Francisco. Colliers has Cincinnati and Dayton offices.
“In 2007 to 2008 when we saw families getting pinched on their personal incomes, there’s always a migration to value, to anything that’s discounted,” Natunewicz said.
“Especially in small communities, people just found them to be a convenient place to shop,” she said.
Consumers continue to be tight spenders, thanks to pressures on their pocketbooks from higher payroll taxes, concerns about rising health care costs, high unemployment and underemployment, reductions in food stamp benefits and expiring long-term unemployment benefits.
As a result, shoppers are spending more on necessary items and less on things they don’t have to have. Discount retailers are expanding food merchandise in direct response to that trend, and the introduction of tobacco drives repeat business, Natunewicz said.
“Whenever you have a recession, people cut back on discretionary spending and they spend more on consumables or necessary items,” she said. “Even the dollar stores have seen some erosion in the confidence of their shoppers.”