Why dollar stores are concerning

Of all the competitive threats facing Walmart, none looms larger in the minds of the retailer’s suppliers than the ongoing expansion and financial success of leading operators in the dollar store segment. That’s according to Walmart suppliers who participated in a survey conducted by Connecting Northwest Arkansas and identified such chains as Dollar General and Family Dollar as the greatest competitive threat to Walmart during the next five years. More than 63% of the 139 supplier who participated identified dollar stores as the biggest competitive threat compared to 54% who mentioned Target and 33% who mentioned Kroger.

Concerns about the dollar store channel are understandable as was illustrated again this week as the company detailed its growth plans for analysts at a meeting in New York following the prior week’s release of third-quarter profits that handily exceeded estimates. The company raised its full-year profit forecast and confirmed that by year end it will have added 600 new units and remodeled or relocated an additional 500 stores. Growth is bumped up next year with plans for 625 new stores and 550 remodels and relocations. Dollar General ended its third quarter with 9,273 stores, which means by this time next year as expansion plans are realized the company could be operating close to 10,000 units concentrated in 35 states.

Meanwhile, Family Dollar has close to 6,800 stores and recently announced a major increase in planned growth with 300 new stores slated to open during its current fiscal year with another 600 to 800 stores due for remodel.