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The Dollar Store Dilemma - Dollarama to Increase Prices Up to $3
The chain doesn't expect higher prices to dissuade customers. Almost half of Dollarama's sales stem from items that cost more than a dollar

For years, the dollar store has been a symbol of the World’s hyper-productive global manufacturing system. Anything you could possibly want – for only a buck. A seemingly recession-proof collection of chains provides cheap materials for do-it-yourself-ers, a variety of food and snacks, and even household and hygiene products. 

Even in 2008, when Canada experienced a recession, Kevin Kane the owner of 21 Great Canadian Dollar Store franchises told Times Colonist that dollar stores are better positioned than a lot of other retail outlets to dodge the double barrels of tightening supply lines and consumer spending.

He also said that no matter what’s happening with the economy, shoppers can buy an increasing range of household and personal products without breaking their budgets. 

In 2009 Dollarama Inc., a Montreal-based discount retailer known for having a $1 limit on their product prices, introduced a multi-price point strategy as part of its growth plan.

The retailer announced yesterday it would implement another series of more expensive non-grocery items once again beginning in August.

Larry Rossy, Dollarama’s chairman and chief executive claims that customers have actually responded well to their last price hike, which resulted in better-than-expected profits.

He says that by, “introducing items at $2.50 and $3.00… we will be able to enhance our customers’ shopping experience.”

The dollar store is still a go-to place to save money when you’re looking for little trinkets and temporary fixtures. But what will this price hike mean for people who are still experiencing the after shocks of 2008?

Maybe not too much.

Regardless of financial woes from consumers, financial results say that the company’s first-quarter profit rose to $42.6 million, a 40 per cent increase from a year earlier.

A total of 51 per cent of Dollarama’s sales were from items costing more than a dollar, compared to 44 per cent a year before. 

According to Dollarama’s annual information form, the Canadian dollar store industry remains under-penetrated relative to the U.S. dollar store industry. In the United States, there is approximately one dollar store for every 14,000 people, as of early 2012. In Canada, there is one dollar store for every 30,000 people.  

_____

Nicole Siena is an intern for the Toronto Standard. Follow her on Twitter at @NicoleSiena.

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