Are Dollar Stores The Next Competition to Drugstores?
This week’s announcement that Mike Bloom was leaving CVS for Family Dollar brings to light the growth of dollar stores. Over the past five years, these once-dowdy stores have been transformed into cleaner and better-stocked units. And, with shoppers pinching pennies, more and more traffic is giving dollar stores a try.
Bloom isn’t the first drugstore executive to migrate to dollar stores. Dollar General, for example, has benefitted from the expertise of former Duane Reade executives. Nuances from drugstore merchandising have been used in dollar stores including a big boost in the number of cosmetics brands.
Bloom is expected to further elevate the ambience of Family Dollar and some think he might even be able to bring more visible beauty brands and perhaps even help the retailer venture into pharmacy. As a 19-year veteran of CVS (and before that Peoples Drug), Bloom has the contacts and knowledge to know what will work. He had sturdy relationships with beauty vendors and has always had a knack for understanding that customer. For example, he was one of those seeing the opportunity for Beauty 360 to fill a gap in the market. Bloom also was part of the Nuance by Salma Hayek line that was launched in August in CVS. That collection helps CVS offer shoppers more upscale, yet well-priced products to CVS. He also has been quick to realize how important premium skin care is to the drug channel.
A few years ago, an executive like Bloom might not give a second look to dollar stores. But that was before they started selling brands like L’Oréal or even having entire lines created just for them. At the same time, dollar stores have to compete with new competition from the likes of the Wal-mart Express stores or Fred’s, which is a value store with pharmacy operations. Family Dollar could find beauty and pharmacy a good fit as the chain looks to boost productivity. Also, Family Dollar has set its sights on rapid growth.
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Already the chain is a big coup for a beauty company to gain access to with more than 7,000 stores across 44 states. “A highly respected leader in the industry, Mike is a great addition to our team. With more than 30 years of operational experience in small-box retailing, he is a seasoned merchant with a proven track record of leading high-performing teams and delivering results,” said Howard Levine, chairman and chief executive officer in a statement. “In addition to being a strong leader, Mike is passionate about the customer and driving their loyalty. In his new role, Mike will have responsibility for major operational functions, including store operations, merchandising, marketing, global sourcing and supply chain.”
Family Dollar Stores announced it plans to open 450 to 500 new stores in fiscal 2012, a 50 percent jump compared with the number of openings in fiscal 2011, and will renovate, relocate or expand over 1,000 locations. “In fiscal 2012, we intend to accelerate investments to drive sales and profitability,” said Levine. Obviously, Family Dollar has a vision and now has an executive to help fulfill that goal.
Dollar stores and other small-format value retailers, including one-price general merchandise stores and closeout stores, are sustaining momentum as one of the hottest retail sectors of the decade. The small-format value retail sector posted solid sales growth of 6.8 percent in 2002, following a year of exceptionally strong sales growth of 10.9 percent in 2001. Retail forecasts another five years of solid growth for this industry sector as dollar stores continue to expand their way into the mainstream. Who is shopping dollar stores? Research from WSL Strategic Retail shows some shoppers are migrating from discount stores. Others have been drugstore shoppers looking for lower prices. While a department store customer probably won’t make the jump to bargain retailing, the facts are that more and more consumers need to find ways to cut costs on commodity and even beauty items. If there’s an executive who finds how to harness the customer, it could very well be Mike Bloom.
People, Place and Things
A few words with James Brown, founder of I Love… Cosmetics Limited. His firm sampled gelato at Duane Reade’s 40 Wall Street store on Thursday to introduce its flavors.
How did the idea of the Gelato sampling come about? What is your current distribution?
Brown: The idea came out of a brainstorming session with our promotional marketing partner. We will be bringing the cart to various Duane Reade locations throughout the month.
The launch is going great. We’re in Duane Reade (255 stores), rolling out to (3,400) Wal-Mart the week of Oct. 31, Rite Aid (January 2012 – 4,600 doors), Navarro (40), Fred Meyer (132), Pamida Stores (200), Kmart (2012 – 1,300 doors), AAFES, Lewis Drug, Drugstore.com, cvs.com, walgreens.com
How is it being merchandised, near what other products? And what are new items in the lineup?
Brown: The product is mostly merchandised in the specialty bath set with each retailer. Duane Reade is also carrying our hand creams and body lotions in all seven flavors, which is merchandised in the lotion planogram.
The main principle for the brand was to be able to easily adapt and create new flavors and experience that consumer’s love. The I Love…brand is scheduled to present new seasonal fragrances for the USA 2012 starting with Strawberries & Milkshake, Juicy Watermelon in the Spring of 2012 and into furthermore a summer limited edition, Tropical Paradise to excite and inspire consumers’ appetite.
What’s In Store
Bartell Drugs Launches New Look: Bartell’s, the country’s oldest drug chain, announced the opening of what the company called its “next generation” store format, a remodel of an existing store in Seattle’s Roosevelt neighborhood. The company developed the new concept in conjunction with Hartmann Group, a consumer consulting firm based in Bellevue, Wash. The store rearranges the traditional drug store format and includes a “Fresh Beauty” cosmetics section with natural and organic product lines; an “Urban Market” section that highlights unique and locally produced products; a “Wellness Courtyard” with vitamins, supplements and healthy beverages; and a “Sweets & Snacks” area with new displays and lighting.
Walgreens Restructures: Walgreen Co. is restructuring its marketing and merchandising staff in a bid to foster a more integrated approach to the two disciplines and intensify the drug chain’s customer focus.
A major component of the realignment is the elimination of the chief marketing officer’s role. As a result, Kim Feil, a vice president who has held that post since joining Walgreens three years ago, is leaving the company at the end of the month.