Canada’s king dollar store chain is taking a step that seems behind the times but suggests that there are new moves for Dollarama. It recently launched a website for e-commerce sales by the case. Though it may appear to be playing catch up, Dollarama’s move is another example of the smart growth being undertaken in North America’s rapidly growing dollar store sector. In this case, Dollarama seems to be targeting small businesses and organizations in a potentially disruptive move.
The old becomes new again
Dollarama Inc’s (TSE:DOL, OCTMKTS:DLMAF) new e-commerce operation at dollarama.com is both a blast from the past and a warning of things to come for department and grocery stores. Dollar stores, most of which offer goods for more than a dollar these days, are growing at a rapid pace in the U.S. and Canada, in part, because they are opening in urban and rural areas where they are often the only option.
At the same time, both new and old-comers are relentlessly innovating within their sector even when that may simply mean applying approaches tested in other retail sectors that may give dollar stores a fresh boost.
For example, many dollar stores are notable for their downscale presentation and design. In some urban neighborhoods, it looks like they simply took the style of businesses that were outdated years ago and are hanging on to squeeze a few final bucks out of the arrangement. But Dollar Tree’s Family Dollar renovations may help change that dynamic.
Over the last year and a half, renovations have raised sales to the point that Family Dollar is reducing its focus on new stores and raising the number of planned renovations. Given their renovations only take about two weeks, they are not going to be the stores of tomorrow but if they turn around the perception that low prices mean decrepit conditions, such moves could be a win-win for all involved.
Dollarama goes online
Dollarama’s move to sell stuff by the case online that most people normally buy in limited quantities could easily be turned into a 1990’s parody of the internet boom. It is the sort of thing that California tech bloggers sneer at only to wonder months later why those Dollar Store ETFs are doing so well. And while it does seem a bit surprising that a retail chain launched in 1992 was not already pushing hard into e-commerce, the emphasis of their offerings show that for Dollarama going online is not simply about taking their current offerings and making them available through mail order. It is about expanding their focus from meeting the needs of individuals shopping for the home to businesses and organizations filling their needs.
Dollarama’s online operations began with a pilot program in Quebec that has now officially launched nationwide. Items are sold by the caseload with an $18 flat rate for delivery fees in most locations to home or business. Dollaramas typically carry around 4,000 items. Their e-commerce operation reduces that to 1000 which are said to be “popular products…for bulk buying.” The program itself is “targeted at businesses and customers who already buy large amounts of items again and again.”
The targeting of small businesses and organizations is evident from the current homepage of dollarama.com that features a “Shop by Activity” option. This option is mostly organized by the activity in particular settings such as schools, workplaces, hospitals, and hotels. And while individuals do buy in bulk for their family, Dollarama is clearly making a play for a wider range of customers than one might normally associate with dollar stores.
Moving forward in 2019
This move comes at an important time for Dollarama which had a difficult 2018. The chain also now accepts credit cards at all locations which is another surprising development to see at such a late stage. And Dollarama is considering another price hike which could include additional items in a move beyond $4 to $5 as the top price.
Dollarama’s relationship with Dollar City, which has stores in El Salvador, Guatemala, and Columbia, offers another route for growth that at least one analyst maintains is “dismissed” by the stock market. Expansion targets include Peru and Ecuador. Apparently, Latin American customers appreciate Dollar City and growth has been particularly robust in Columbia where it is only a couple of years old.
Dollarama’s approach to e-commerce and credit cards is a great example of a company initially focusing on the needs of a specific sector of the population and then gradually expanding to larger markets. The addition of credit cards meets the needs of customers with more resources than Dollarama’s initial customer base including business customers.
Selling in bulk online furthers the push for business customers. This approach can be discussed in terms of disruptive innovation if one is open to the concept of innovations including tried-and-true approaches in one sector being applied in another. If not, it may be enough to know that Dollarama is making strong moves in a lucrative sector that is in a period of transformation.