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NGA: How to compete with dollar stores

SAN DIEGO – Dollar stores present serious competition to independent retailers, increasingly in food, but there are a few key ways to differentiate with them.

One of the easiest is to beat them at their own game, said Steve Dillard, president of Dillard Consulting, to attendees at a National Grocers Association workshop Feb. 24.

“Take a dead corner of your store and change it” to a dollar section, Dillard said. Keep it simple and make it a separate section away from other merchandise.

He said retailers who have tried this report there’s very little cannibalization of sales.

Aside from that, Dillard said, beat them at what they can’t do.

Dollar stores are mostly known by the brands Dollar General and Dollar Tree, and its recent acquisition of Family Dollar.

“They’re everywhere, and they’re taking business,” he said. “They’re cheaper than Walmart, and that definitely has Walmart’s attention.”

Dollar stores are offering more fresh produce, but because they offer most of it for $1, they’re limited in what they can offer.

Dillard said independent retailers can beat them with higher quality and better variety in fresh produce, and even more so in the meat department.

Another way is for retailers to develop signature items in every fresh department that these lower priced competitors can’t match.

“Offer single day sales, like ‘two for Tuesday’ on items,” he said because national dollar store chains don’t have the flexibility to do things like this.

One thing dollar stores do well is that they make it very easy for shoppers to find baskets to shop with, which increases their purchase size, he said. Independent retailers should do this so create more purchases from hurried shoppers. Put them throughout the store.

In the end, consumers may like dollar stores, but there are only so many things they can buy there compared to their local supermarket.

“Consumers like their local independents,” he said, so offer them more of what they like from your stores.

Greg Johnson is the Director of Media Development for Blue Book Services.