Convenience Store News - July 2018 - 55
landscape indicates that approximately $2
trillion of retail sales are generated across
275,000 stores annually, according to data
compiled by Cadent Consulting Group in
Wilton, Conn. C-stores comprise nearly 60
percent of all traditional outlets, but only
about 15 percent of merchandise sales.
"Dollar stores may be attracted to the sheer
number of convenience stores and the
potential for fuel sales," noted Don Stuart,
managing director of Cadent Consulting.
"While testing fuel may be enticing, we
believe it makes far more sense to leverage
dollar stores' specific strength, which is
price vs. grocery/mass."
Therefore, Stuart sees the biggest opportunity for the dollar channel to be food/
snacks and freshness, which has the potential to hurt the convenience channel but,
The Pros & Cons
of Dollar Stores
Strong points of the dollar-store format:
* Provides competitive pricing in a manageable,
convenient store format, essentially the intersection
of value and convenience.
Dollar General already has a convenience store format called DGX. The
inaugural DGX store in Nashville, Tenn., measures 3,400 square feet.
more so, supermarkets.
"Traditional supermarket outlet unit sales are declining, and
there are significant opportunities across both dollar and
limited-assortment discount stores - such as Aldi - to
capture this potential," Stuart told Convenience Store News.
The Fuel Factor
Still, experts can't seem to discount the competitive
match-up of the dollar channel vs. the convenience channel
when considering the fuel factor.
* Small formats cater to time-conscious consumer
needs with quick and easy solutions.
Back in the summer of 2016, Dollar General made headlines
when it bought 41 former Walmart Express locations and
said it would continue to operate the gas pumps at 37 of
these stores, newly rebranded as Dollar General. The chain
also previously ran a test of a Dollar General location with
gas pumps three years earlier.
* Millennials and Generation Z consumers are on
the verge of conversion as the dollar channel's
freshness focus continues to intensify.
But ultimately, does fuel really make sense for dollar stores?
The consensus seems to be "not really." However, c-stores
should stay on their toes, nonetheless.
* Offers real value to a broad consumer group.
* As the middle class shrinks and income disparity
continues to grow, the format has greater
Weak points of the dollar-store format:
* Low profit margins.
* Walmart, while less convenient of a shopping
experience, has a broader assortment and is
always in direct competition, especially in the
* A "ho-hum" store experience, especially when
contrasted with top-tier c-stores.
* No fuel and their typical strip mall locations are
not conducive to fuel stations.
* Technology and internet/mobile shopping
"Dollar stores may be attracted to the potential for
fuel sales. However, fuel is a highly visible and pricecompetitive commodity, which often does not generate
traffic into the stores and, in the future, could fall victim
to charging stations and electric cars," noted Stuart.
"Dollar stores may be chasing after very few pennies of
profit if they try to fuel up."
Another limiting factor is that many dollar stores are
located in strip malls, making it difficult to add a forecourt.
"Expansion of gas as an offering will be limited to standalone stores with enough land to expand, which may only
be viable in certain parts of the country," affirmed Daniels.
Joseph Bona, president of New York-based Bona Design
Lab, expanded on the constraining role of real estate in
many of the markets where dollar chains operate.
"In the densest markets of the country, like the Northeast, most dollar stores are in strip malls in areas where
drugstores and convenience stores already own the best
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