Last week, US-based discount retailer Family Dollar posted a 7.6% increase in net sales to $2.1bn (£1.36bn) on the back of strong growth in the consumables category.
Last week, US-based discount retailer Family Dollar posted a 7.6% increase in net sales to $2.1bn (£1.36bn) on the back of strong growth in the consumables category. The sales rise followed an announcement by Dollar General, a competing discount chain, that it planned to open 625 new stores throughout 2012 in the states of California and Massachusetts.
The strong results and expansion plans come on the back of continued growth in the US-based discount sector, which is running into the double digits. In particular, growth in the store base of discount chains is expected to contribute significantly to total sales over the coming years, with Family Dollar also planning to open 450 to 500 shops.
Considering the state of the US economy, with unemployment still stubbornly high (although having fallen back slightly) and economic growth still relatively flat, discount chains are set to continue taking share from more traditional retailers. This is emphasised by the fact discounters have been growing sales in the high single digits for years, while Walmart’s like-for-like sales have been negative.
In response to the threat posed by the discounters, Walmart has focused on restoring EDLP, introducing a price guarantee, and more importantly launching smaller format concepts, although these measures have largely failed to stem the discounters’ growth.
In addition, US-based discounters are increasingly encroaching on mainstream grocers’ key business by broadening their grocery assortment. Notable examples include Family Dollar, whose key strategy for 2012 includes expanding its selection of consumables to try to increase basket size. It has already had strong growth in private-label sales in the consumables category.
It has also made progress with the introduction of its Family Pantry range of private-label grocery products – encompassing non-perishable ranges such as plastic bags, cleaning products, peanut butter, confectionery, snacks, condiments and tinned fruit and vegetables.
Mainstream grocers are also facing pressure from drugstore chains such as Walgreens and CVS, which are increasing their grocery ranges. US drugstore group Rite Aid has partnered with Save-a-Lot, the discounter banner of Supervalu to pilot 10 co-branded stores offering a full grocery shop. It is likely that this, alongside the continued growth in the discount sector, will have an impact on mainstream US grocers.
- David Gray, retail analyst, Planet Retail.
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