Dollarama will soon have more than 400 stores in Quebec. There is one Dollarama for 22,000 Quebecers, the third largest concentration in Canada after New Brunswick and Newfoundland. Despite the elite who shun these businesses, the success of dollar stores is indisputable. And these stores are selling more and more food, and these products are the same as those sold by the big chains, but 30% to 75% cheaper.
Recent investigations by intrepid journalists in Quebec and Ontario have revealed a discovery that may surprise some: Dollar stores, particularly Dollarama, offer non-perishable food items identical to those in traditional grocery stores, but at lower prices. considerably lower, often in the range of 30% to 75%. While many buyers were aware of this, many probably weren’t. But this begs the question: how is this possible? How can Dollarama offer the exact same food products, the same size and the same brands, at a much lower price?
The population per Dollarama store varies from one province to another in Canada, as shown in this table.
Different business models, period. Dollarama’s ability to offer unbeatable prices is based on two essential pillars: remarkably low operational costs and unique relationships with suppliers.
First, Dollarama offers only one choice for each food option. A size and brand of ketchup, same thing for peanut butter, and so on. Once they are suppliers, companies have access to a sort of monopoly, or almost. The result is advantageous deals that benefit consumers. Suppliers can also sidestep concerns about the priority grocery stores might give to their private labels and Dollarama’s private label strategy, let’s face it, isn’t very strong.
Dollarama could open a 400e store in Quebec within a few months. With projections suggesting the possibility of exceeding 2,000 stores in Canada by 2030, Dollarama’s influence on the market is poised for substantial growth.
Dollarama’s success goes beyond its pricing strategy. The company excels at keeping operational costs minimal, with average daily staff expenses capped at just $500. Its stores operate with efficiency and simplicity, unlike large grocery chains such as Loblaw, Metro and Empire, which also operate as real estate giants, which could drive up indirect costs over time.
Additionally, while dollar stores like Dollarama avoid costly advertising campaigns, these savings can be passed on to consumers in the form of lower prices. When you see certain spokespeople on television, you are essentially covering the cost of those ads when you shop at the big box stores. In contrast, Dollarama shoppers enjoy the benefits of lower prices without needing to subsidize a celebrity-stuffed marketing campaign.
But not everything is perfect at Dollarama. Let’s be frank: Critics may argue that Dollarama faces socio-economic biases and challenges related to product quality and store ambiance. A visit to Dollarama may reveal an unpleasant odor reminiscent of a plastic factory in Beijing. More than 50% of the products sold by the chain come from China. While it’s true that the smell of a plastic factory may linger in some stores, many consumers are willing to overlook this for budgetary reasons. The reality is that Dollarama serves as a lifeline to many Canadians struggling to make ends meet.
However, Dollarama is not without its challenges. Recent surveys, notably those carried out by the daily 24 hours, revealed cases where Dollarama stores located near large grocery stores were forced to limit their product offerings. This practice is not unique to Dollarama and highlights broader issues within the retail industry. To truly promote competitive pricing in the grocery sector, it is imperative to address these issues, and Canada’s Competition Bureau should do so without delay.
While grocery elites continue to shun the role of dollar stores, the reality is that these stores make the market more competitive. Since the chain will open 70 new stores this year alone, its success is undeniable. While Canadians wait for a savior to bring in more competition, dollar stores are already doing it, quietly and efficiently, providing the affordability that is sorely needed these days.