Consolidation hits the dollar store industry

I posted the following comment on RetailWire after Dollar Tree announced its acquisition of Family Dollar. While I don’t consider myself an expert in this segment, I think it’s worth noting that a high-flying sector is now maturing and heading into the “consolidation” phase that many other retail segments have undergone. Here’s my point of view:

This acquisition follows the typical pattern of consolidation after a period of growth. This has happened over the years in segment after segment of the retail industry (and other industries), from department stores to discounters. The combined company now becomes roughly equal in size to its biggest competitor, Dollar General, but will have some growing pains to contend with because of some location overlap along with different approaches to the “dollar” business.

If the outcome is successful, there are two strong competitors in this category. They both have the potential to become more robust factors as big box stores like Walmart and Target rush into the small-format battle. Meanwhile, look for other industry segments (e.g. off-prices) to hit a period of maturity followed by consolidation, too.

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