When do you really know that a store format has made a big impact? When it spawns a host of imitators.
Such was the case when the entry of membership warehouse clubs led supermarkets to debut club-pack sections and the growth of category-killer retailers prompted supermarkets to unveil category-specific, store-within-store sections.
Now the hot format is the dollar store. Based on a relatively simple concept, it is one of the fastest-growing retail segments. A number of dollar chains and independents have made inroads by including supermarket-type food and nonfood products. The biggest chains are Dollar General and Family Dollar. The stores appeal both to consumers who can't spend more than a dollar and to those who don't want to. Adding to the price attraction is the draw of seasonal and "in-and-out" merchandise and the typically small footprint that makes it easy to walk the selling floor.
None of this has escaped the notice of supermarkets and other retailers, who are now readying their own interpretations of dollar store merchandising. An article on Page 37 this week points to two such defensive efforts, one of which involves the world's largest retailer.
Wal-Mart Stores is experimenting with in-store dollar sections in markets including Texas and Baltimore, supported by signage and prime store placements.
Independent food retailer Pratt Foods, Shawnee, Okla., reports good results from a recent move to carve out an in-store dollar section with items ranging from vitamin E cream to household utensils to dish detergent.
Supervalu got into the game earlier this year when it agreed to acquire Deal$ -- Nothing Over a Dollar, a St. Louis-based retailer with 45 units.
Supervalu plans to use Deal$ distribution to broaden the nonfood merchandise assortment at its Save-A-Lot stores.
But the dollar stores are not to be outdone. In a possible game of one-upmanship with supermarkets, 99 Cents Only Stores, a retailer based in City of Commerce, Calif., has launched a "gourmet fancy food section" in a new unit in Sacramento, as reported in a story on Page 33. What kind of gourmet foods can be sold for 99 cents? The offerings include artichoke hearts, crabmeat and sesame seed oil. Some units even sell a 99-cent bottle of Merlot.
This marketing approach shows signs of genius for deftly handling seemingly contradictory consumer demands. Shoppers want to spend less but also want upscale, value-added items. Now they can fill both of these needs in one place.
Of course, a dollar store has to be careful it doesn't upscale itself out of its own retail segment. But 99 Cents Only Stores seems to have figured out that much of the battle is in the marketing. Calling something gourmet adds to the allure, even if it's only 99 cents worth of gourmet.
There will be many permutations of the dollar merchandising trend before it reaches maturity. Supermarkets would be wise to experiment to avoid the kinds of past market share losses to other competitive formats. But it's not just a defensive game. Supermarkets are desperately searching for any avenues of incremental growth, even if it's just a dollar at a time.
