Dollar stores have become the darlings of not just discount shoppers, but the net-lease investors, retail center owners and even neighboring tenants. WREB recently spoke with Kurt Kalocin, first vice president at SRS Real Estate Partners in Phoenix, who represents Dollar Tree, about the strategies this retailer and other dollar stores employ to nab the best spaces possible.
Are there certain companies or types of companies dollar stores tend to prefer when considering a new space?
With Dollar Tree, the prefer to be with other traffic-generating retail, whether it be other big box retailers like Walmart or Target, grocery stores or even just other discount stores that create a retailing synergy.
Dollar Tree seems to be expanding quite rapidly in Arizona. Is this trend reminiscent of Dollar Tree's activity throughout the West, or are they particularly bullish on Arizona?
Dollar Tree is looking to open at least 600 stores per year nationally. This means they will be looking at the right opportunities in all markets. In the West, and in Arizona, there are still areas that are not served by stores. This is why we see this as a prime area for store growth. In addition, areas with population growth make sense for new stores. Now that many of the markets in Arizona are growing again, we are looking at sites in those areas.
What kinds of market fundamentals need to be in place for a dollar store to view a particular location as a viable option?
They are ideally looking for densely populated areas, and areas with larger households seem to make the most sense. The economics of a site, however, need to make sense as well. Although there may be a space available in a shopping center that Dollar Tree likes, they won't overpay just to be there, the economics have to make sense.
Both health-conscious and ethnic grocers are very hot out West right now. Are there any strategies dollar stores are currently employing to nab some of these market shares?
There are some strong operators out there for those types of retailers. In the ethnic and Hispanic category, Pro's Ranch Market stands out as a concept that brings in a lot of traffic into the Dollar Tree stores and in the adjacent shopping centers. Dollar Tree recently opened up next to one in Glendale Ariz. They aren't necessarily looking to take market share away from them, but more to play off the traffic they generate.
With Dollar Tree, Family Dollar, Dollar General, 99 Cents Only, etc., there seems to be a lot of competition in the dollar store market. How can one particular chain or location set itself apart?
The difference is that Dollar Tree sells all items for $1. It is the largest national one-price retailer. Family Dollar and Dollar General are considered dollar stores, but they are really just variety stores that sell items at all different price points, as not everything is $1. Many items are much more. I look at them as almost more of a mini-Walmart than a true dollar store. 99 Cents Only is a single-price retailer as well, but are only located in a few states in the Southwest. They're not a national player, so they don't get the buying power of a national retailer like Dollar Tree.