2013, MONTREAL WRITER JONATHAN LEMIEUX PUBLISHED A CHEAP-eats cookbook based on the three years he sustained himself mainly on dollar-store food.
The cookbook, Survivre avec une poignee de change (or translated: Surviving with a Handful of Change) chronicles Lemieux’s time as a student living the bargain-basement life.
It’s unlikely the dollar-store diet will become a fad. Dollarama doesn’t sell fresh produce or staples such as milk and eggs. But its solid offering of packaged food and household goods is an appealing option for budget-conscious consumers.
And based on Dollarama’s strong financial performance, the Montreal-based chain is taking a bite out of other retailers’ market share. Even Walmart.
While Q4 sales were dampened by Canada’s severe winter weather, Dollarama is on a clear growth trajectory. For fiscal 2013, the chain posted $1.86 billion in sales, a 16% increase from the prior year.
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In Q3, sales increased by 14.2%, to $523 million, and comparable store sales grew 4.8%. Dollarama, which has more than 820 locations in Canada, plans to open 84 stores this year and 70 to 80 in 2015.
Dollarama doesn’t release its food sales, but “consumable products” represent 37% (or $687 million) of total annual retail revenues.
The category includes drinks, snacks, candy and other food products, as well as household products, cleaning supplies, paper, health and beauty care and pet food. All are items people would nor- mally buy at grocery stores or big-box retailers.
“[Dollarama’s] predictable low-price offer is a way for budgeting consumers to ensure they get the most for their food dollar, as well as being able to buy consumables at low cost,” says Wendy Evans, president of Evans and Company Consultants, a retail consultancy in Toronto.
Even when people don’t shop Dollarama for food, they’re buying high-margin goods such as cards, housewares and party supplies. And what’s Dollarama’s gain is a loss for Walmart, Target and supermarkets.
The Dollarama formula is finding favour with Canadian moms. According to Environics’ “The Modern Mom Report,” Dollarama is the fourth most frequented grocery-shopping destination.
When asked, “Which of these grocery stores have you shopped at in the past four weeks?” 40% of moms said Dollarama. That’s just behind Walmart (62%), Costco (52%) and Shoppers Drug Mart (47%).
While the survey doesn’t show how much moms are shopping Dollarama specifically for grocery, the company “is very successful in getting into the repertoire of stores used by Canadian moms,” says Robin Brown, senior VP of consumer insights at Environics Research. Although moms may not be doing their weekly grocery shop at Dollarama, they’re still frequenting the chain more often than Metro, Sobeys, Safeway or Loblaw.
In the U.S., dollar stores such as Dollar General and Family Dollar pose a bigger threat to traditional grocers, as they often sell perishable and frozen food. That’s made dollar stores a potential takeover target for big retailers keen to expand into smaller formats.
Stateside, Walmart has lost sales to dollar stores and is hoping to capture shopper fill-in trips with smaller formats such as Walmart Express and its c-store, Walmart to Go, which just opened, in Bentonville, Ark. A recent Credit Suisse report suggested Walmart should buy Family Dollar to jump-start its small- store effort.
Date: June 20, 2014