Allure of single price point could prompt further dollar store designs

Walk into a Target store anywhere in the U.S. and it’s a safe bet there will be at least a few customer rummaging through the bins of single price point merchandise in the Dollar Spot located just inside store entrances. The ever changing assortment’s treasure hunt appeal and single price point value proposition are simply too much for many customers to bypass. It is enough to make wanna-be merchants wonder if further expansion of the concept makes sense for Target, especially considering the raging success companies such as Dollar General and Family Dollar are having.

On Wednesday, Familiy Dollar reported a second quarter profit that increased 10.7% to $136.4 million compared with $123.2 million for the second quarter of fiscal 2011. Comparable-store sales increased 4.5%, thanks to increased customer traffic and increased average ticket. Sales were strongest in the consumables and seasonal and electronics categories.

Strong results from the nation’s second largest dollar store operator followed even stronger results the prior week from Dollar General, a company which now operates more than 10,000 stores. Dollar General's quarterly profit surged 33% to a record $299 million, from $226 million in the prior year, and comps were up 6.5%.

Dollar General plans to open 625 new stores this year and remodel 550, while Family Dollar plans to open 450 to 500 stores.