Table of Contents
MATTHEWS, N.C. — Mike Bloom recalls that when he first met Family Dollar chairman and chief executive officer Howard Levine, he was impressed by the man but knew little about his company.
Mike Bloom recalls that when he first met Family Dollar chairman and chief executive officer Howard Levine, he was impressed by the man but knew little about his company.
"Family Dollar was not on our radar screen, at any of the retailers I worked for," Bloom says. "We used to think the retailers in that channel were just selling close-out goods from old stores. But while we, and, I would argue, many, were ignoring them, they were down here being brilliant, quietly remodeling stores and getting their mix right. And meanwhile the economy became very challenging for many consumers, and people were looking for the kind of value that Family Dollar was offering."
Bloom was obviously convinced of the company’s promise; he joined Family Dollar as president and chief operating officer in October 2011.
Family Dollar is certainly on every mass retailer’s radar screen now, and the company continues to reinvent itself, improving the shoppability of its stores while broadening its merchandise mix to become even more relevant to its growing customer base.
In its most recent fiscal year, Family Dollar increased its net sales 9.2% and its comparable store sales 4.7%. Adjusted earnings increased 16.7%. During the course of the 2012 fiscal year, which ended on August 25, Family Dollar also opened 475 new stores (including 41 in California); renovated, relocated or expanded 854 stores; substantially expanded its assortment in key consumable businesses like food and health and beauty aids; added such new product categories as tobacco, magazines and gift cards; expanded coolers in 1,375 stores; and opened its 10th distribution center and started building an 11th.
Because of accomplishments like those, the editors of MMR have named Howard Levine and Mike Bloom the publication’s 2012 Mass Market Retailers of the Year.
Levine notes that Family Dollar has reinvented itself several times since his father, Leon Levine, founded the company more than 50 years ago. In the early days Family Dollar mainly sold close-out and irregular merchandise, for example, but it evolved into a value retailer carrying only first quality goods.
"Family Dollar over the years has always tried to reinvent ourselves to make sure we’re staying current, and that we’re positioned properly given the competitive playing field," Levine says. "What we have not changed is our value and convenience proposition — small box stores, conveniently located in the neighborhoods where our consumers live, with parking that allows our customers to drive right up to the front of the store and get in and get out quickly, without paying a premium for that in terms of pricing. That has been the key to our success and it’s what resonates so well with many, many customers."
The current reinvention effort has two main elements: remaking the store environment through remodeling and relocations to make it more appealing and easier to shop; and expanding the merchandise assortment to include more grocery, personal care products and health and beauty aids.
Levine notes that Family Dollar is now spending $150,000 or so per store for its store renovations, which is about three times what it has spent historically. But the result is "great looking stores — as good as any small box retailer," he says. Those remodeled stores appeal to Family Dollar’s core low-income consumers, as well as to the middle-income "trade in" consumers who are shopping the chain.
"We want to have people who want to shop with us, and not that have to shop with us," Levine explains.
Bloom notes that the changes to Family Dollar’s merchandise assortment are driven by what its core customers are buying and want to buy, rather than on some strategic goal hatched by company executives.
"Every decision we make here is based on what our customers want," Bloom says. "It’s not about what we want. We have to really understand our customer and use her as a filter for everything that we do. She leads the way, and we’ll go where she wants us to go. She votes everyday with her wallet, and she’s voting for necessities.
"We still sell a lot of discretionary products, and our customer, for example, still buys underwear and socks in our store. But as our customer continues to struggle, she doesn’t need to buy new bed sheets or window treatments as frequently as she used to. She has to take care of her family’s everyday needs."
The expanded and updated merchandise assortments position Family Dollar to attract customers to its stores with greater frequency. Bloom notes that the company’s core customers spend about $6,000 a year in the marketplace, making an average of 183 trips to various retail stores, spending about $33 per trip.
Currently Family Dollar only accounts for about six of those shopping trips, or about $84 of each of those consumer’s annual spending.
Boosting its share of its core customer’s wallet is one way Family Dollar will grow. To that end, the company’s new merchandising initiatives are making its stores into destinations where shoppers can conveniently find good values on a wide variety of frequently purchased items: food; household chemicals and paper products; health, beauty and personal care; and tobacco.
Family Dollar also sees plenty of room for growth through store openings. The company, which finished its 2012 fiscal year with 7,442 stores, plans to open another 400 to 500 stores this year.
"We’ve talked about doubling the size of the chain in the United States," Levine says. "There will be a lot of growth out west, particularly in California, over the next several years. But we also see tremendous potential for in-fill. Some urban centers like Chicago, New York, Altanta and Philadelphia, offer tremendous potential."
All in all, expect Family Dollar to become an even bigger presence on mass retailers’ radar screens in the years ahead.
