Dollar stores get spruced up; deals less clear
Dollar stores have accelerated their growth by transforming stores with wider aisles, better lighting and more name brands. But their prices still usually are slightly more expensive than Target Corp. or Walmart Stores Inc., said Dutch Fox, an equities analyst for FBR Capital Markets & Co.
And rather than an array of organic or premium brands, dollar stores focus on offering a handful of big-name products with the widest appeal. Instead of offering 20 types of ketchup brands and sizes, for example, there might only be five, said Jim Smits, head of consumables at Dollar General.
Those select options are getting more attractive, however. One of the biggest ways dollar stores are raising their profile is by stocking up on more groceries and name brands. Over the past two years, Family Dollar said it increased its food inventory by 30 percent, with the addition of items such as Pepsi and Gorton's fish sticks. The trend is likely to continue, with major packaged food companies looking to hitch their wagons to the dollar store boom.
The brands have changed the dollar-store landscape, said Fox of FBR Capital Markets.
“Ten years ago, dollar stores were places you went to because you had to, because you didn't have a ton of money,” he said. “The stuff on the shelves was a wreck — the assortment was all over the place.”
What you'll pay
It probably won't be a dollar. The “dollar store” moniker has been rendered outdated by inflation, with companies no longer able to adhere to that price tag alone. But Dollar General and Family Dollar say about a quarter of their products still cost just a buck.
The trick in many of those cases is to pay attention to the package size. Pat Conroy, vice chairman of Deloitte's consumer products division, said dollar stores are able to make money by working with suppliers to offer name brand products in smaller packages.
But if your goal is to score the lowest price for every item on your grocery list, you'll need to do some legwork comparing prices, mental math comparing prices and package sizes, and more homework to stay on top of weekly promotions at various outlets.