Dollar stores rival Walmart - here's why

An article on BNET earlier this year suggests that, despite the best efforts of retailers like Aldi and Walmart to entice lower-income consumers to spend more in their stores, dollar stores are proving a worthy rival.

People who started shopping at Dollar Tree and 99-cent Only Stores out of necessity, are continuing to frequent them even as the country emerges from the recession. Consumers seem to be buying more everyday needs such as food, dish soap and paper towels in dollar stores and they drop by more often.

For Dollar Tree, consolidated net sales for the second quarter were $1.38 billion, a 12.7% increase compared to $1.22 billion reported for the quarter ended August 1, 2009. Retail sales for 99-cent Only Stores increased by 4.6% to $336.6 million and same-store sales increased 2.7% so far this year.

According to a report from Bloomsburg Businessweek, Dollar General and Family Dollar also continue to grow, even as Walmart begins to lose ground.

According to the Business Week article, a number of factors have contributed to the continuing prosperity of dollar stores.

1. Rising gas prices are causing consumers to stick closer to home, rather than make long drives to big box stores.

2. Dollar stores are drawing shoppers by stocking more name brand products. For instance, Family Dollar now has more food, health and beauty aids and paper products. It added more than 100 grocery items in the last quarter, including Prego pasta sauce, Kraft foods, A1 Steak Sauce and Smucker's jams.

Dollar General has been doing much the same thing, installing taller shelves to make room for more national brands, as well as its private label food.

3. Dollar stores continue to expand. Dollar Tree plans to add 220 new stores this year, Dollar General, 660 new stores and Family Dollar expects to build 200 new stores this year.

4. One analyst says that dollar stores have the advantage of being located close to where the lowest income families live.

Personally, I think dollar stores will continue to thrive because now that people have realized how much money they save on necessities, why would they want to go back to paying full price? Just as an example, you can get two greeting cards for a buck, as opposed to $3 or $4 at a card shop.

The consistency of the prices is a big draw, too, especially at Dollar Tree and 99-cent Only Stores where you know you'll never pay more than $1 for any one thing. And many of us find it a fun shopping experience. Dollar stores are constantly getting in new merchandise, so you never know what you might find. I love a good treasure hunt, don't you?

Marlene Alexander is a freelance writer and dollar store diva. She writes ideas and tips for home decorating using only items from the dollar store.