The big three U.S. Dollar store chains — Dollar general Corp., household Dollar stores Inc. And Dollar Tree Inc. — thrived during the great Recession while countless other retailers struggled just to survive. Return year-to-year sales development has slowed a little bit post-recession and also some quarters have actually been more daunting than others, performance remains typically positive.

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Goodlettsville, Tenn.-based Dollar basic reported a 9.2 percent rise in net sales because that fiscal 2013 contrasted to budget 2012. Meanwhile, family members Dollar, Matthews, N.C., claimed it realized an 11.4 percent increase for 2013, and Chesapeake, Va.-based dissension Tree reported that sales increased 6.1 percent. All three chains reported comparable-store sales development for budget 2013 together well.

Moreover, every chain trust the market has room because that significantly an ext dollar keep locations. New store openings, therefore, remain a strong focus.

In 2013, Dollar general opened 650 stores and also intends to include 700 much more in 2014, Richard Dreiling, the company’s chairman and also CEO, said in a march 13 earnings call for the 4th quarter of fiscal 2013. In one Oct. 9, 2013, fourth-quarter budget 2013 earnings call, Howard Levine, household Dollar’s executive chairman and CEO, said the agency opened 500 shop in 2013 and intends to include 525 in 2014. And Dollar Tree opened up 343 shop in 2013, CEO Bob Sasser provided during the this firm Feb. 26 fourth-quarter fiscal 2013 income call, and intends to broaden by 375 stores in 2014.

Still, the instance isn’t as rosy as it might seem.

“All three chains have been tested as their lower-income customers have faced high joblessness levels, greater payroll taxes and reductions in government assistance,” claims Carol Spieckerman, president of retail consultancy newmarketbuilders. “Unfortunately, family Dollar embarked upon number of resource-intensive campaigns as this dynamics converged, including including thousands of new items and also implementing major fixture and also layout changes. Hopefully, the impact to that is bottom line will be short-lived.”

Emphasis on consumables, store brands

With their details shoppers taking longer than the general populace to “feel much more comfortable spending,” however, disagreement General and Family Dollar have actually been doing much more than just adding store locations to spur growth, says Ann Natunewicz, vice president of Colliers International’s Retail services Group, mountain Francisco. Both have taken actions to do consumables a greater percentage of their product mix.

“The impact, that course, as soon as you are stocking much more consumables is her margins drop,” she says. “And retailers, in general, room under a most pressure through gross margins and also trying to find efficiencies in the supply chain.”

But the enhancement of much more private label items to the mix provides retailers a chance to recapture some of that shed margin, Natunewicz notes.

Family disagreement adds save brand SKUs

And in 2013, family members Dollar did simply that, launching nearly 500 brand-new private brand SKUs, Michael Bloom, the this firm president and also chief operation officer till January of this year, said throughout the Oct. 9 earnings call. He detailed that complete private brand sales climbed 10 percent in 2013, while sales for personal brand consumables jumped 20 percent.

Tammy DeBoer, senior vice president, food and private brand for family Dollar, notes that the company’s private brand assortment is relevant to its particular customers and delivers everyday value come them. Some of the retailer’s own brands keep Brands editors spotted in a recent store visit encompass Family disagreement (air fresheners, dusting cloths and more), family members Gourmet (food products), family members Values (food storage bags, hangers and more), family members Chef (storage containers, kitchen utensils and more) and also Kidgets (baby diapers, wipes and more).

“As we build items, our goal is to enhance or improve upon the leading nationwide brands,” she says. “Quality in product and also packaging has actually been a significant area that focus. … exclusive brands beat an enormous duty in our business, and many of our customers depend on castle to provide for your families.”

Two exciting brand-new additions to the keep brand assortment, DeBoer says, are the family Dollar wash Pacs item, i m sorry “looks great on shelf and compares to birds Pods,” yet comes in a smaller count that meshes v customers’ value and also convenience needs; and a revamped line of family members Gourmet peanuts.

“We boosted the top quality of this items and additionally updated the packaging,” she explains of the peanuts. “These items are delicious and also look great on shelf.”

Also working in family members Dollar’s favor is a focus on steering efficiencies and also simplifying processes, Spieckerman says, specifically through that pallet shipment program.

“Family Dollar’s decisions to curtail excessive and hard-to-execute promotional programs and also return come an EDLP version are also steps in the ideal direction,” she says.

Dollar basic aims for SKU productivity

SKU “productivity,” meanwhile, proceeds to be a focal suggest for dissension General, v Dreiling mentioning during the earnings call the removed of much more than 300 SKUs in 2013; 300 much more were figured out for removed or already eliminated in 2014. He pointed to the possibility to do more with fewer SKUs while expanding in categories that make sense. And store brands most likely will be component of any type of category expansion.

“We still have actually a most opportunity in our exclusive label, our international sourcing and also our shrink,” the said.

Dollar General additionally has the benefit of having a “very solid management team,” notes Deborah Weinswig, chief customer officer because that Waltham, Mass.-based Profitect.

“They have actually been an extremely innovative in their private label program and have really cleaned up the packaging and the taste the the products,” she says. “They have actually attracted a an ext affluent customer during the most recent macroeconomic downturn and they have actually been able to tweak your margins by location based on zone pricing.”

Some of dollar General’s private brands store Brands editors spotted throughout a recent visit encompass Clover sink (food and beverages) DG wellness (OTC products and also more), DG home (toilet tissue, file towels and also more), iMagine (kids’ arts supplies and also more), DG Office (office supplies), EverPet Basics (pet food/treats, accessories and also more), comfort Bay (sheets, pillows and also more), and also True life (kitchen towels, bakeware and more). We likewise noticed basics together as document towels readily available under what shows up to it is in a tiered save brand structure: smart & an easy (value), DG house (national brand equivalent) and also DG house Premium Prints (premium).

As Dave D’Arezzo, disagreement General’s chef merchandising officer and executive evil president, explains, the company’s personal brands integrate high top quality with a low price to offer as a value solution to customers.

“Through the consistent evaluation the exclusive brands mix, we continually improve and expand offerings to supply on our worth promise,” he says.

All of dollar General’s personal brand products additionally come v a 100 percent satisfaction guarantee, D’Arezzo adds. If a client is not completely satisfied with one of the products, that or she have the right to return the product and get a full refund.

“This offer permits our client a risk-free possibility to try new products there is no the concern of no being fully satisfied,” that says, “and to introduce the worth proposition to customers who may be unfamiliar v our private brands.”

Although D’Arezzo states it is an overwhelming to single out favorites among Dollar General’s newest keep brand offerings, the does point out a few.

“Some of mine favorite new items room those we’ve had great customer response and agree to,” the notes, “including our brand-new Clover sink frozen pizzas and vegetables, coffee K-Cup , and also chocolate fudge brownie fiber bars.”

Outside the strictly private brand side, Spieckerman notes the Dollar basic has done well in “rolltainer” enhancements that enhance efficiency and also reduce labor, and in maintaining to its EDLP strategy — even as family members Dollar escalated task here.

“In the end, dissension General available message consistency and also clarity come its customers,” she says. “Its arrival of higher-priced item in HBA to be one misstep that it has actually gone on to correct.”

Dollar Tree in ~ a disadvantage?

Both dissension General and also Family disagreement recently added tobacco come the assortment together an attempt, in part, to increase trip frequency. They additionally have ramped up capabilities significantly on the refrigerated and frozen food next in recent years — although save Brands editors noticed tiny in the means of exclusive brand product advance here during our visits. Overall, Natunewicz trust they could have a leg up on dissension Tree as soon as it comes to being located for continued growth.

“Family Dollar and Dollar general are probably positioned far better than dissension Tree, in my opinion, because of that focus on the discretionary customer,” she says, “and also their willingness to experiment through different-sized stores.”

Moreover, the fact that disagreement Tree is the just true “dollar store” among the three, through U.S. Pricing being set at $1 or much less per item, likewise could prove to it is in a an obstacle as inflation rises, Natunewicz says.

“Even with resources investments and also being smart around your supply chain, there’s only so long you have the right to keep there and also still sell that breadth the product mix and be kind of a one-stop shop,” she explains. “The question is: Does the matter? If dissension Tree starts placing out points that are $1.50 or $2.00, carry out they have sufficient brand loyalty for world to look beyond that? ns don’t think human being will suddenly protect against shopping over there if the habit’s currently engrained.”

A ongoing emphasis on personal brands probably could aid keep expenses down and margins increase for the moment being. And Dollar Tree certainly appears to have the largest number of own brands and also own-brand items amongst the 3 chains. During a recent visit come a disagreement Tree store, save Brands’ editor spotted accurate dozens of exclusive brands — consisting of six various brands extending body lotions alone. A very little sampling of the very own brands we spotted includes Garden arsenal (gardening supplies and more), residence Collection (pot holders, kitchen towels and more), Party! (party supplies), jot (pens, office supplies and more), The residence Store (cleaning supplies and also more), and Assured (personal treatment products).

Unlike dollar General and also Family Dollar, dissension Tree uses different store brands within various food category (e.g., seaside Bay Confections because that own-brand non-chocolate candy and Landmark Confections for cacao candy). Yet private label food commodities are restricted to choose food subcategories; many food offerings are readily available under manufacturers’ value brands.

Continued growth additionally could come via planned expansion of that Deal$ keep format and also Dollar Tree Canada locations (where the price is $1.25 every item rather of $1.00). And as Sasser detailed during the Feb. 26 revenue call, disagreement Tree straight — the company’s e-commerce eight — also is broadening fast. Throughout 2013, disagreement Tree observed a 20 percent boost in site traffic, and the company now offers an ext than 3,800 items digital (via both dollar Tree Direct and also Deal$ Direct).

“Of the three, dollar Tree is far more focused on e-commerce and also site-to-store,” Spieckerman says, “and the multi-format model makes that far an ext agile in the end.”

Competitive threats

Going forward, the big three dollar save chains additionally will be require to address threats external the dollar save sector if they space to proceed to prosper and grow. Castle will should “keep prices sharp and product assortments compelling,” for example, if they are to compete with the nimble and ever-changing Amazon, Spieckerman point out.

“In general, dollar stores have actually been less delicate to Amazon than various other retailers due to the fact that Amazon hasn’t attacked lower-price-point items or specifically set its sights top top beating dollar shop at their own game,” she says. “That could readjust in the blink of an eye, of course, simply as the did once Amazon go after fashion, office products, food and also other categories.”

Already, the e-commerce behemoth has actually “doubled down on convenience” via expansion and acceleration of customer shipping and also delivery options, Spieckerman notes.

“This indirect impacts any retailer the relies heavily on convenience together an advantage,” she says, “including the leading dollar chains.”

Other competition comes from discounters such together Batavia, Ill.-based ALDI Inc., i beg your pardon boasts destination-type personal brand offerings, and even Bentonville, Ark.-based Walmart, which is speeding up the rollout that its little formats, Spieckerman explains.

“Amazon may not be going ~ dollar shop directly, yet Walmart plainly is,” she says, “and once Walmart concentrates on a goal, there will be fallout.”

Still, many low-income shoppers right now prefer dollar stores for their fill-in shopping trips, Spieckerman notes, and it will certainly take Walmart quite some time to achieve far-ranging scale with its tiny formats to fulfill such trips.

“I would call fill-in trips a must-win for all three chains,” she stresses.

Looking ahead, both family members Dollar and also Dollar general probably will must rethink their e-commerce strategy — or lack thereof — too.

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“Despite your still-growing physical locations, disagreement General, and an especially Family Dollar, are greatly ignoring site-to-store connectivity and also omni-channel opportunities,” Spieckerman says. “Why aren’t they talking much more about it as soon as one the the key reasons Walmart is ramping increase its store layouts is to connect the areas to e-commerce? dissension General and also Family Dollar seem to it is in relying ~ above a crowd-out strategy and also winning through their physics scale, but it’s myopic to develop still much more stores together a single-channel strategy.”

On the personal brand front, no one of the three chains yes, really represents a exclusive brand destination, Spieckerman says, yet customers execute appreciate the value such brand offer.

“That said, household Dollar is paying closer fist to quality and also to providing a clear value proposition and also price separation in between its exclusive brands and also national brands,” she says. “The need for simplicity and clarity can’t be overestimated in the disagreement channel — it provides all the distinction in basket size.”