The small format value retailing sector has grown from a $31 billion channel five years ago to more than $42 billion today and channel sales growth will remain solid. After surging in recent years, Retail Forward projects sales growth will moderate at an average rate of 5.4% a year through 2009.
While dollar stores and small format value retailers will continue to grow going forward, same-store sales gains are becoming harder to achieve and some profitability issues are beginning to surface. The sector is operating in a tough environment. Core low- and lower-middle income shoppers are plagued with rising gasoline and food costs as well as high unemployment.
“As these core shoppers’ budgets get stretched to the limit, we’re seeing a reduction in the number of shopping trips and a postponement of discretionary purchases,” commented Nick McCoy, senior consultant. “However, these same economic pressures may lead to more consumers trying the format because everyone loves a bargain and American shoppers increasingly are value-oriented shoppers,” he adds.