"Dollar store" serves as a catch-all term, but multiple, distinct formats have emerged. While they may stress low price and convenience, their products, price points and purpose differ. Those differences may warrant varying competitive responses.
Willard Bishop Consulting, Barrington, Ill., has divided the dollar store into three formats: single price (99 Cents Only, Dollar Tree); overruns or closeouts (Big Lots); and extreme value (Dollar General, Family Dollar Stores). The last one, with its heavy reliance on sales of food and basic household needs, may pose the biggest threat to Center Store. "When customers go to a Dollar General store, they generally go there with a fairly good idea of what they're going to buy," said David Bishop, director at the consulting firm. Unlike single-price or closeout stores, they're regular destinations for shoppers, "not generally places people go to treasure hunt."
By comparison, supermarket dollar sections aim to address the needs met by the single-price format. As a result, they may not directly confront the more threatening extreme-value format. Competing with those kinds of stores means offering similar kinds of household supplies and food staples at the prices dollar store customers have come to know, Bishop said.
Baker Foods, in addition to having dollar sections in some of its six Piggly Wiggly stores in central Alabama, sets prices on regular-aisle paper products, cleaning supplies and dry grocery items as competitively as possible.
"In dry grocery, we seem to be [running] a little hotter ads than we used to run," owner Ronnie Baker noted.
At Cub Foods, Stillwater, Minn., pallet drops with special deals, everyday low prices and "Wall of Values" sections bolster the value message sent by the stores' dollar sections, said Dale Monson, director of grocery and liquor for the company's Cub West division.