Dollar stores growing, may open pharmacies

Dollar discount stores have become more competitive and more profitable in the post-recession economy. If one dollar store’s strategy catches on, soon you may even be filling your prescriptions there.

Deals submits to drug test

Deals dollar store, a subsidiary of Dollar Tree, recently opened a pharmacy in one of its 181 stores. If the test catches on at the West Park, Fla., location, more pharmacies may be added in other stores.

Dollar Tree’s Timothy J. Reid said:

“(Our) reason for being is to deliver more value to customers. We’re always looking for better ways to do just that. We’ll see where it leads.”

If the strategy is successful, can other dollar discount chains be far behind? Gene Hoffman, the CEO of Corporate Strategies International, sees the move as inevitable:

“Dollar stores, like a fast-moving river, will fill all available territories. Thus pharmacies will likely become commonplace in many dollar stores.”

Some analysts skeptical

Not every industry analyst sees the move as foolproof, however. Richard Seesel of the retail strategy firm In Focus LLC says Dollar Tree may have an uphill battle gaining consumer acceptance of in-store pharmacies.

“There may be an image problem associated with dollar stores — the lowest common denominator brand position may be out of sync with customer expectations. Target, Walmart and Costco don’t have the same problem. … I’m a skeptic.”

Rapidly growing retail segment

There is little doubt, however, that the dollar store is a rapidly growing segment of the retail market. Stores are expanding to sell a wider variety of brand name merchandise at rock-bottom prices, in a collective bid to steal market shares from the big box stores.

Dollar stores have also been luring in customers who, in the past, would have turned up their noses at the retailers.

Ann Natunewicz of U.S. Retail Research for Colliers International, said:

“The rapid evaporation of wealth has profoundly changed the way Americans shop. … Dollar stores are big business now. Their product selection and price points compete favorably with the big box stores. The convenience they provide … serve(s) existing customers and attract new ones.”

According to a study by Colliers International, the number of stores owned by the three main dollar discount outlet chains outnumbered Walgreens, Rite Aid and CVS stores combined by more than 1,300 stores.

Dollar General, the largest in the nation, recently opened store number 10,000. Family Dollar has about 7,100 stores nationwide. Dollar Tree has about 4,350.

Farmed-out pharmacy

PharmaGo, an independent pharmacy company, handles the prescription-filling chores for the Florida Deals store. It says it offers prescription prices comparable to Walmart, so consumers shouldn’t expect to get their Lipitor refilled for a dollar. However, a shopper filling a prescription and doing some shopping at the same time will likely walk away with more change than he or she would have gotten back at the box store giant.

[Need to refill a prescription between paychecks? We can help.]

Serves a community need

David Marcotte, a senior vice president for Kantar Retail, told DailyFinance that dollar store pharmacies could also serve a valuable community need:

“The dollar stores are overwhelmingly located in lower-income areas that may or may not be served by a drug store or supermarket pharmacy.”

Time will tell

Time will tell if the notion of dollar store pharmacies can catch on. However, convenience and value together do sound like a winning combo in today’s crawling economy.

Sources

DailyFinance
SunSentinel
Forbes