Convenience Store News - July 2018 - 56
corners," Bona said. "Because of the costs
involved, it's unlikely that dollar stores
would buy the kind of large, multi-acre sites
they would need to accommodate their
footprints, the gas pumps and the supporting parking."
He agrees that breaking into the gasoline
business in such places would be quite
difficult - but the same cannot be said for
"The calculus is quite different, though, in a
place like rural Alabama, where land is cheap
and dollar chains already operate plenty of
freestanding stores," Bona told CSNews. "A
low-price fuel strategy certainly drives traffic
to Costco. In those markets where the economics pencil out, it is at least possible that
dollar stores could pursue a similar strategy."
Dollar stores are poised to have a bright
future with respect to today's up-and-coming
generations, analysts and experts predict. The
popularity of dollar stores with millennials, in
particular, should be of concern to the c-store
sector, according to Bona.
firm The NPD Group that millennials now make up about
25 percent of the six-figure-income customers who shop at
any of the three biggest dollar store chains.
As for Generation Z - those born from the mid-1990s to
the early 2000s - "we could see them reject dollar stores
for one reason or another, but I wouldn't count on it,"
said Bona. "It's part of the reason that differentiation is so
important for c-stores, today and in the future."
According to Daniels, technology can be a key part of the
differentiation equation because right now, dollar stores
"With the middle class shrinking and income disparity
continuing to grow, dollar stores remain well positioned
for future growth," said Daniels. "Like other retail shoppers,
the target customer of the dollar store would like to shop
online, but often does not have an Amazon Prime account
and are late adopters."
If and when the dollar store customer gravitates to internet/mobile shopping, particularly as the younger generations that are more tech-savvy age, dollar stores will need
to play a quick catch-up.
Along with embracing technology, Stuart adds that with
the proper freshness focus - which he believes should be
easier to achieve for dollar stores than c-stores - millennials and Gen Zs can be converted.
Protecting Your Turf
How can c-stores protect their business from the infiltration
of dollar stores?
"They need to continue offering competitive pricing on
gas to drive customer foot traffic to their locations," stated
Daniels. "They also need to stay true to their concept."
"Differentiation is key," according to Bona, who adds that
savvy c-stores are moving away from grocery and fill-in
missions and toward "foodvenience."
Dollar Tree is rolling out a "Snack Zone" initiative at hundreds of its
stores. The Snack Zone encompasses cold beverages, candy, and sweet
and salty snacks.
"The easiest thing to do, with respect to
millennials, is to trade in stereotypes. This is
where we get the images of bearded hipsters drinking out of Mason jars and clamoring for all things 'small batch,'" he said. "The
truth, though, is a lot more complicated.
Millennials aren't at all afraid of being seen
in dollar stores, even though there's nothing
particularly hip about them."
If you look at the transcripts of earnings
calls from Dollar General, what you find is
that "even affluent millennials are shopping
at dollar stores in droves," he continued.
In fact, Bona cited findings from research
56 Convenience Store News C S N E W S . c o m
"That is to say, they are embracing food-on-the-go, served
up in appealing store environments," Bona said, highlighting
that instead of mostly selling bread, milk, eggs, cigarettes
and lottery, today's c-stores are offering up the likes of
Korean barbecue, pulled pork paninis, fresh salads and
caramel mocha coffee with nonfat milk.
"The level of sophistication of food at top-tier convenience
retailers is remarkable and helping to position these companies as destinations," he added.
Still, c-store operators would be wise to keep watch on
how much innovation dollar stores are willing to undertake
as they continue to expand.
"If they push the envelope in the years ahead, there is a
risk that we'll see some erosion from the traditional key
destination categories for the convenience channel,"
Bona acknowledged. CSN