Error message

  • Warning: preg_match() [function.preg-match]: Unknown modifier '2' in getOS() (line 1183 of /home/citywire/public_html/sites/all/themes/tcw/template.php).
  • Warning: preg_match() [function.preg-match]: Unknown modifier 'c' in getOS() (line 1183 of /home/citywire/public_html/sites/all/themes/tcw/template.php).

Dollar store segment consolidation likely to put pressure on Wal-Mart

story by Kim Souza
ksouza@thecitywire.com

Wal-Mart Stores management has expressed no public interest in acquiring Family Dollar, which has takeover offers from Dollar Tree and Dollar General. The lack of interest by Wal-Mart doesn’t mean the retail giant will go unscathed by the results, according to retail experts.

The pending consolidation in the dollar store segment will leave one of the bidders out in the cold and their largest competitor — Wal-Mart Stores — watching from the sidelines.

“The imminent acquisition of Family Dollar by either Dollar Tree or Dollar General is by no means a non-event for Wal-Mart. Although these stores are called dollar stores, in many communities they have come to serve as convenient general stores for shoppers who don’t want to make a trip to town or would prefer not to traverse a supercenter for a couple of items,” said Carol Spieckerman, CEO of Newmarketbuilders.

She said Wal-Mart is laser focused on cementing its reputation for value but it has perhaps been even more obsessed with grabbing shoppers’ shorter fill-in trips — a market valued at $415 billion. Last fall, Wal-Mart reported that it had roughly 10% of this fill-in market  which accounts for 40% of the nation’s grocery spend.

The obsession by Wal-Mart is warranted. Spieckerman said a “mega dollar store could really spoil the fun in markets where Wal-Mart has not opened small format stores.”

Fierce Retail executive editor Laura Heller told The City Wire that Wal-Mart’s biggest competition isn’t from Amazon, but rather the dollar stores who are nipping away at Wal-Mart’s core customer.

Heller said at every turn Wal-Mart’s moves have been to woo shoppers from dollar stores, hence the opening of more smaller formats and the guaranteed low prices via Savings Catcher and other ad matches.

She said with 55% of Walmart U.S. sales being grocery items, dollar stores could hurt Wal-Mart more than Amazon or Target. She said Wal-Mart execs are closely watching the dollar store consolidation given their core customers greatly overlap. 

Spieckerman likes Wal-Mart’s game plan of building their own network of smaller stores, and said Dollar Tree, even it’s left out, is a bigger problem for Wal-Mart. Speickerman said Dollar Tree is a digitally-aware, multi-format chain with international presence. Those three attributes set it apart from Dollar General and make it the bigger threat.

“If the combined (dollar store) entity nailed localized price competitiveness in the markets where Wal-Mart has Express and/or Neighborhood Market locations, price will become the determiner. This is why Savings Catcher really is Wal-Mart’s ‘killer app’ at the end of the day,” Spieckerman said. “Dollar General’s digital coupon program is slick but I don’t see it as a match for Savings Catcher.”

Advertisement:

She said Wal-Mart’s second line of defense is its site-to-store capabilities which are already making its small format locations more productive than several dollar stores and one reason why Walmart wasn’t tempted to join the bidding party for Family Dollar.

Wal-Mart said its Neighborhood Markets have the ability to generate up to 10 times the sales of a dollar store. The smaller Express stores generate 5 to 6 times the revenue per unit because of their site-to-store, pharmacy and fuel offerings.

Five Star Votes: 
Average: 5 (3 votes)

Like This Article? Share It!