Dollar Tree + Dollar General = 26,480 Stores and Growing

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Perhaps because I grew up in the upper South where the Dollar format was born (Family Dollar in North Carolina, Dollar Tree in Virginia Beach and Dollar General in Kentucky) I have long been fascinated with their business model. By focusing in on a even price points that are mostly under $10; staying to store footprints that are under 8,000 square feet and focusing on lower income shoppers without credit, these companies have managed to become the most frequently overlooked major players in discount retail.

Dollar Tree purchased Family Dollar eleven months ago and according to a Charlotte Observer article by Katherine Peralta, things are going very nicely. In fact, Family Dollar and its competitor, Dollar General, are showing strong growth at a time when those who supply the more affluent consumers are struggling.  Macy's, as an example, had its worst quarter since the recession.

Why are these low income bricks and mortar retailers prospering while their more respected upper income brethren are struggling? It's the Internet.

Two months ago I wrote a piece, "Is Dollar General Immune to the Digital Marketplace," in which I pointed to the Internet as, ironically, a key to these chains' recent performance. Not because they secure sales from e-commerce but because they don't. 

Think about it. A Macy's shopper has two things that are required to purchase on line: An Internet connection and a credit card. That makes these high end chains susceptible to losing customers to digital commerce.

Dollar General and Dollar Tree consumers, however, lack both. For that reason, Wal-Mart, Target and Macy's need to worry about Amazon. Dollar General and Dollar Tree do not. 

For the foreseeable future, my advice is get comfortable with the lower end of the consumer spectrum. Its where the growth, at least in bricks in mortar, is going to happen. 

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