Chicago Tribune – Not all retailers are trimming back their brick-and-mortar footprints. Dollar stores and off-price chains, taking advantage of solid sales and bargain-hunting shoppers, are on an expansion kick, claiming half the spots on a list of 10 retailers adding the most new store square footage, according to commercial real estate and analytics firm CoStar.
Dollar General, second overall, led a trio of dollar stores in CoStar’s top 10, based on retailers’ announced U.S. store openings as of the second quarter of 2016. Dollar General, which started the year with nearly 12,500 stores, has announced plans to open 900 more this year and another 1,000 in 2017. Last week, the chain said it’s looking to hire 10,000 new employees by mid-October.
About 80 of this year’s new Dollar Generals will be roughly 20 percent smaller than typical locations, designed for urban areas where larger stores would be too costly or rural areas with fewer potential customers, spokeswoman Crystal Ghassemi said earlier this year. Family Dollar will add about 4.3 million square feet of retail space, and Dollar Tree — which acquired Family Dollar last year — is adding about 3.2 million, according to CoStar. Part of the appeal is convenience, which makes a big network of stores important.
Dollar stores also tend to drive growth with new locations, not big growth in sales at existing stores, said Hunter Harris, vice president at consulting firm Boston Retail Partners. Dollar General’s comparable store sales were up 0.7 percent in the second quarter of 2016 over the same period last year, while Dollar Tree’s grew by 1.2 percent. Big-box chains could start trying to match their prices, so keeping that growth going is “not going to be an easy task,” Harris said.
If more people begin purchasing basic consumer goods and personal care products online, a big retail footprint could become a liability if stores can’t find ways to stand out, said Steven Barr, PricewaterhouseCoopers’ U.S. retail and consumer sector leader.
But the price point “clearly has resonated,” even with higher-income customers and deal-hungry millennials, Harris said. Chicago has a Logan Square Dollar General and a Dollar Tree in Lakeview. “We see them popping up in neighborhoods and regions you wouldn’t have expected to find them 10 years ago.”
Similarly, off-price chains Marshalls and T.J. Maxx — sixth and seventh on CoStar’s list, with plans to add 3 million and about 2.9 million square feet, respectively — draw customers with the “treasure hunt” of finding a deal, Harris said.
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