Another day, another dollar store opens in area
Recession-pounded consumers who find Target, Kohl’s and even Wal-Mart a bit pricey are moving down to the dollar stores.
As many retailers suffer — quarterly profits dipped this summer at mighty Wal-Mart, for example — dollar stores are opening by the hundreds. And some locate in well-to-do suburbs that once seemed out of reach for chains near the bottom of the retail barrel.
Growth by Dollar Tree, Family Dollar and Dollar General — the Big Three of discount retailing — has become a lifeline to commercial property owners struggling against rising vacancy rates.
"It’s a fascinating trend consistent with neoclassic economic theory," said Bob Lewis, president of Development Strategies, an economic development consultant in St. Louis. "It relates to marginal utility and inferior goods concepts. And the need for commercial real estate owners to fill up space."
Dollar Tree, with nearly two dozen stores in the St. Louis area, is about to open another store at the Heritage Place shopping center on Olive Boulevard in Creve Coeur. The latest Dollar Tree, scheduled to open Thursday, is taking space formerly occupied by Famous Footwear, which moved in July to a smaller spot.
Marginal utility? Inferior goods? Lewis doesn’t equate inferior with poor quality. He means inexpensive items.
"You can survive on ramen noodles if you’re poor," Lewis said. "You don’t buy more of them after you get a good job. But if you’re poor, inferior goods go up in demand."
Marginal utility relates to shopping "ambience," he said. While many shoppers prefer the surroundings of upscale stores, some find that dollar-store shopping for staple items bestows smart-shopper status, Lewis said.
"It’s a fascinating little situation we have going on here," he added. "If you’re buying the things you might normally pick up at Target or Wal-Mart for a few pennies more, why not use the dollar place?"
Shopping center owners benefit by getting occupants for millions of square feet of retail space payday loans.
"Otherwise, it would probably stay vacant or be rented out to a dance studio, or something, just so that the owners can generate a bit of income and keep the lights on," Lewis said.
Mike Swearngin, vice president of Pace Properties, said Dollar Tree’s presence at Heritage Place helps boost the center’s occupancy to 90 percent, up from 80 percent a year ago. He said Dollar Tree will add stability to Heritage Place and draw the same women who already shop at the center’s Marshalls and TJ Maxx stores.
"It’s the type of retailer that seems to be relatively recession-proof," Swearngin said.
In August, Dollar Tree, based in Chesapeake, Va., reported a 50 percent jump in per-share quarterly earnings. Sales rose 12 percent, to $1.22 billion. Dollar Tree had 3,717 stores, 200 more than a year earlier. Spokeswoman Shelley Davis said the company knows the recession is sending shoppers its way from more upscale places.
"We have a sense we are benefiting from trade downs," she said. "But we also feel our regular loyal customers are shopping us more. We do feel that Dollar Tree can operate in a booming or recovering economy."
She said the 9,600-square-foot Creve Coeur outlet is within the company’s ideal size.
Dollar Tree isn’t alone in enjoying growth. Dollar General Co.’s latest quarterly profit tripled, to $93.6 million, from $27.7 million a year earlier. Sales rose 11 percent, to $2.91 billion. The Goodlettsville, Tenn., company has said it will open 500 stores in addition to the 8,577 it had at the end of July.
Dollar General already has more than 600 stores in Missouri and Illinois, including about 20 in the St. Louis area. Family Dollar has about 30 area stores. The region’s next Family Dollar will open in January at 9070 West Florissant Avenue in Ferguson.