Discount Store Comebacks
Dollar stores aren’t being discounted by Canadian consumers — the opposite, in fact.
Between 2012 and 2017, Canadian Grocer reports that sales growth among chain discount retailers increased more than twice as much compared to Canada’s overall retail chain sales.
Dollarama has more than 1,200 stores in Canada. Dollar Tree has more than 220 — double what they had a year ago. And they are far from the only discount stores in Canada. Giant Tiger has recently had a resurgence and expanded.
And they are not the only discount retailers in the country. The Bargain Shop, Real Canadian Superstore, Dollar Store with More, Great Canadian Dollar Store, Buck or Two, and more are contributing to a fast-growing sector.
Throughout the COVID-19 pandemic, discount stores have continued to remain strong. While Dollarama did see a slump in foot traffic early on, their online sales boomed according to BNN Bloomberg. Additionally, they plan to open 1,700 locations across Canada by 2027 – adding approximately 400 stores in seven years.
Macleans also reported that after the 2008 economic crisis, discount retail surged and remained a staple for the next decade. The difference now may be moving to an omnichannel experience — offering eCommerce options and curbside pickup, for example, or even automated retail options, like vending machines.
Discount retail appears to be here to stay. These trends could guide the next decade:
- More Food Sales
While discount stores used to focus mainly on novelty items and home goods, their scope is changing. They have become a one-stop-shop for a wide variety of products — including food.
Dr. Sylvain Charlebois, a professor at Dalhousie University specializing in food distribution and policy, estimates that Dollarama sold more than $1.6 billion worth of food products in 2019.
“We can easily hypothesize that dollar stores in Canada sold to Canadians well over $2.1 billion of food products this past year,” Charlebois wrote in December 2019.
That figure represents the same amount of sales generated by 212 regular-sized grocery stores in Canada, Charlebois said.
Shelf-stable foods, convenience items, and — of course — snacks often cost less at discount stores. And it could be just the beginning.
- The Retail Economy and the ‘Missing Middle’
We’ve written before about the growing divide in the retail economy — the luxury “high-end” and the discount “low-end.” Most retailers in the middle are seeing less or stagnating growth, while the high and low-end of the spectrum have grown by leaps and bounds.
Discounts, deals, and low prices influence a lot of buying decisions, especially for younger generations such as Gen Z.
Manufacturers can take advantage of this growing divide by assessing how and where to position their products. The middle may not be a winning price point anymore; instead, a lower price and discount store distribution strategy could result in more sales.
- Convenience That eCommerce Can’t Offer
While some discount stores have started to offer eCommerce services (particularly during the COVID-19 pandemic), traditionally eCommerce has not been a big factor in their success.
This could be changing, but also discount stores can offer a convenience that online shopping simply cannot yet, even with the advance of same-day shipping.
For instance, parents who want to pick up a cheap toy for their child are not likely to buy it online. Unless you have planned to run out of toothpaste, you may still have to go to the store to get it. A last-minute Halloween costume could require the perfect pair of earrings or a headband but there’s no time to get it online.
Even with the rise of eCommerce, these convenient, affordable purchases are part of what drives consumers to discount stores and will likely continue to do so.
- Affordable Alternatives for Everyday Items
Part of the appeal of discount stores is, of course, the discount. Especially when they offer the same or similar products to larger stores.
For instance, at a dollar store, consumers may be able to buy a brand-name toothpaste in smaller packaging for $1. Or buy an off-brand toothpaste in a larger size for the same price.
The allure of discount stores can sometimes be about perception. It may cost less in volume to buy the full-size version of a product at a larger store; however, many consumers don’t necessarily consider the size — they consider the price point. $1 vs. $4 – even for more of the product — can seem like a better deal.
This can appeal to shoppers on a fixed income, with a strict budget, or those who always want the lowest price.
- Unique and Trendy Product Design
Discount doesn’t have to mean boring or unattractive — in fact, putting more effort into the design can pay off.
In the past few years, the aesthetic quality of items offered by discount stores has also increased. While designs used to be plainer (for example, a solid, muted colour), now they often feature bolder colours or designs.
For example, a recent Buzzfeed Canada article shared a reaction from the writer about entering a Giant Tiger for the first time in a while.
“The spring fashion accessory display made me say “ooh” out loud,” the writer said.
“The girlswear section had LOL Doll dresses my 5-year-old would love.”
The writer went on to say that she browsed the store and ended up spending $70 on housewares and holiday supplies.
What do you think is on the horizon for discount stores in Canada? Let us know on social media. Storesupport Canada is on Twitter, Facebook, and LinkedIn.
We can help you take control of your brand in-store, whether that’s a discount store, a luxury store, or anywhere in between. Learn more by calling 1-877-421-5081 or visiting www.storesupport.ca.
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