NEW YORK (MarketWatch) — With millions of Americans out of work, dollar stores have been on a tear in much of the country. Not so in most of Manhattan, where roughly a dozen dollar stores are scrambling to stay in business.
Some are going a bit more upscale. Others are delaying raising prices even as their costs increase.
At Jack’s 99 Cent Store on 32nd Street on a recent week day, alongside sugar, toys and cookies at 99 cents apiece were $1.99 six-piece sushi rolls; $1.99 organic and kosher cheddar cheese; $1.29 frozen tilapia fish fillet; $1.29 pepper ham; and $1.29 brie and feta cheese. The public-announcement system touted organic soy milk on the third floor.
Nationwide, dollar stores have been grabbing market share in a tough economy. The four largest publicly traded chains, led by Dollar General Corp.
and Family Dollar Stores Inc.
, had 20,600 stores at the end of 2010, up 9.3% from three years earlier, according to Barclays Capital analyst Meredith Adler.
New York City is a different story. Rents have climbed, making New York City in general — and Manhattan in particular — less hospitable terrain for dollar stores with their tight margins. The discount market is growing nicely in Manhattan, but it’s being dominated by retailers like T.J. Maxx
, Century 21 and Daffy’s, which attract much more well-to-do customers than dollar stores, said Faith Hope Consolo of Prudential Douglas Elliman.
She added the number of dollar stores in Manhattan hasn’t seen growth in years.
Family Dollar has 45 stores in New York City, but only one in Manhattan, in Washington Heights. Dollar Tree
has 20 in the city, but only one store in Manhattan, in Harlem. And Dollar General, the nation’s largest chain with about 9,500 stores, doesn’t have a single store in New York City.
Instead, the biggest player in the borough is Jack’s. Sales at the firm’s three locations in Manhattan have been flat to slightly down, said Vice President of Operations Ira Steinberg. “People are no longer just spending freely,” he said. “They are being more conscious of what they buy. They don’t want to get caught short anymore.”
To maintain profit despite sluggish sales and increased rent and other costs, Jack’s two months ago began to lower other expenses, such as buying electricity from independent sellers instead of from Con Edison to cut costs, he said. “It’s hard trying to exist in Manhattan,” he said. “You just have to stay very aggressive in maintaining your sales base.”
About three short street blocks south of Rockefeller Center, where stores such Banana Republic
and Saks Inc.
lure well-heeled tourists, 99 Cent Dreams occupies a 10,000-square-foot first floor and basement space on 46th Street. Despite its name, it’s selling items like a $24.99 Black & Decker iron and a $21.99 George Foreman grilling machine. About seven or eight years ago, everything at the store was 99 cents, said 36-year-old store manager Bipin Patel.
Like Jack’s, sales at the store, opened about 12 years ago, have stayed flat even though its rent last year went up at least 10%, Patel said.
“We are trying to survive,” he said. “I’m not telling you we are surviving. In the afternoon you see tons of people, but everyone has only one or two items.”
To hold on to customers, the store said it has delayed on passing product- cost increase. For example, whereas its cost for a 20-ounce bottle of Coke and other soft drinks rose to 90 cents apiece from 67 cents two years ago, it waited until last year to raise its retail price to $1.19 from $1, Patel said. At a Duane Reade nearby, the same bottle sells for $1.99.
“Customers don’t like these (new) prices, but we don’t have any choice,” he said. “We depend on volume and sell at a low profit margin.”
To better reflect its merchandise changes, the store is in the process of changing its name to 5th Ave Dollar Discount, he said.
“There’s no 99-cent store anymore,” he said. “Nobody can survive that right now.”
View more information: https://www.marketwatch.com/story/dollar-stores-scramble-to-survive-in-manhattan-2011-06-18