Singles Scene: Dollar Store Expo shows the latest in buck trends

Tuesday, June 28, 2005 | 8:17 a.m.

The dancing inflatable sign is convulsing, rippling, bowing forward. A blinking strobe flashes intermittently through its body. It flails its arms and jerks backwards.

This nylon attraction, when strategically placed in a strip mall parking lot, alerts consumers that there is a bargain somewhere nearby. A super-galactic sale is ahead, it says.

Merely part of a display at last week's Dollar Store Expo at the Las Vegas Convention Center, its presence still read the same: bargains galore.

They came in the form of plastic swan soap holders, box cutters, toys, hammers, kitchen towels, greeting cards, tchotchkes, sundries and nonperishables, mostly low-cost items that can sell for a buck or a little more than a dollar Welcome to the fastest-growing segment of the retail industry.

At this annual event, retailers, wholesalers and distributors converge to see and display the latest in the discount world, a world that has taken over not only strip malls, but aisles in grocery stores and dollar bins at Target stores, where you'll likely find clusters of wide-eyed bargain hunters.

"We've become a T-shirt society," exhibitor Paul Fintak said, in between talking with retailers about his company's designer stationary. "Everything has changed. The dress code has changed. They want cheap, cheap, cheap."

But to get to "cheap," prices are cut, profit margins are decreased and "bulk" has become the operative word. For Fintak, who has always been a "Made in America" man, his future has him looking overseas. Manufacturing in China, he is learning, would cut costs immensely and allow him to compete.

"People are telling us, 'You have to go to China because it would save us money,' " Fintak's wife, Carol, said. "They're saying it would save us 70 percent. So I think we're going to have to do it."

Like many other exhibitors at last week's expo, this is the Fintaks' first dollar-store trade show. Normally their stationery company services high-end gift shops. But ever since a dollar store started buying their inventory and reassembled their packs of greeting cards to sell at a lower price, the Fintaks have found themselves entering a new world, where the dollar, literally, is the goal.

And it's not just in the Fintaks' town of St. Petersburg, Fla. Dollar stores are growing ever more popular. Family Dollar owns more than 5,700 stores in the U.S. Dollar General reports that it has more than 7,400 stores in the U.S., with 722 stores opening last year. Dollar Tree operates more than 2,400 stores.

Comparatively, there are roughly 5,800 7-Eleven stores nationwide. And Starbucks has more than 4,500 coffee houses on city corners and suburban strip malls and 2,158 licensed locations (such as shops in airports).

According to industry representatives, dollar stores are no longer serving only low-income families. And ACNielsen reports that retailers are moving from rural areas into urban and suburban areas, catering to more affluent customers.

"They're becoming a destiny store," said Jill Hallford, sales and marketing analyst for Fisher. "A large percentage of people who shop at dollar stores aren't there because they have to (shop at dollar stores), they are there because they think it's cool. They think, 'I wonder what kind of cool thing I can find.'" Now that dollar stores are installing refrigerated units, consumers can find just about anything at a dollar store, from milk and eggs to pet products, bath and beauty products, sweets, socks, T-shirts, office supplies and even tools though often low-grade.

Ray Batkiewicz, vice president of Regent Products Corp., a dollar-store wholesaler, sees the dollar store as a bargain haven where consumers can always walk out happy.

"You let your kids go in the store and say, 'Go, find something.' You don't have to worry about him coming back with a $20 truck," Batkiewicz said.

Also, he said, "There's that treasure-hunt mentality. That impulse. I've done that myself. You think, 'Do I need that?' Hell, it's only a buck."

Knowing the appeal, Edward Hubbard, chief executive for Witch School, passed up next month's International New Age Conference in Denver to come to the Dollar Store Expo in Las Vegas.

"In our town, they basically killed all the factories," Hubbard said, referring to Hoopeston, Ill., where his products are made. "What happened is NAFTA came in, (it) literally tore off six factories."

To stay afloat in a town with a high unemployment rate, Hubbard and his colleagues have created Mini Spell Candles, tiny scented candles that come with attached spells that deal with love, money, health and inspiration. They're hand-assembled and can be sold for $1 or less. Hubbard hopes they will be popular among the Harry Potter and "Bewitched" fans.

Normally, Witch School sells to new-age stores. But given the decision of covering the Dollar Store Expo or the International New Age Trade Show in Denver, the company opted for the popularity of dollar stores, where it might be able to push more of its product.

"We had a choice of which was better and we chose this," Hubbard said.

Food for a buck

As part of the food pavilion, which signals the next direction for dollar stores, River Ranch Fresh Foods had a booth of assorted produced-to-order salad bags that the company is trying to move into the dollar stores. Already, River Ranch Fresh Foods has its products in 15 dollar stores in the Midwest.

Companies such as White Castle have items they transition into the dollar-store market, and Meow Mix is having success with its small boxes of cat food, which grocery stores are starting to cut in an effort to sell bulk bag products.

To accommodate dollar-store shoppers, Fisher nuts has reformatted its Basics Line, created four years ago for the military, to sell in dollar stores.

The mixed-nut product is smaller and has more peanuts (as opposed to more expensive nuts) than a grocery store line.

"Overall, it's the same product, it's just smaller size," said Jill Hallford, sales and marketing analyst for John B. Sanfilippo & Son, which owns the Fisher brand. "You have to try to meet their (price) so they can make their margins. Because it's such a huge growth channel, we had to come up with a new product."

Nikki King, vice president of Nikki's Cards & Balloons, wonders how low the price wars will go in serving thrifty customers.

"It's gotta stop at something, right?" she said. "Or eventually everything is free."

Prior to dollar stores, King said, "We sold to gift stores, grocery stores. The cards used to sell for $2.50. Then we started coming out with a two-for-a-dollar line that wholesales for 25 cents."

Of the price wars, she said, "Hopefully it stops at this. It's affecting everybody. The only person it's good for is the customer. If it keeps going lower and lower, there's no room for the profit."

On the other hand, King's father, Rich Deverell, who owns Popular Greetings and has been selling greeting cards for 31 years beginning with American Greeting cards, still sees the dollar market as a lucrative opportunity.

"It keeps us little guys in the business, gives us the opportunity to play in the field," said Deverell, who at one time owned as many as 30 video stores in Pennsylvania before corporations such as Blockbuster drove him out of business. "It's hard to compete against corporate. Dollar stores are one of the businesses you can go into today and it's still growing."

Batkiewicz, responding to a rumor on the expo floor that for every dollar store that opens, 10 close because of its limited pricing, said, "There are challenges now with the higher fuel prices, it's impacting all of us."

But of the failures, he said, "That happens to any kind of stores."

With dollar stores, he said, "It's a relatively easy business to run because everything does sell for a dollar. You don't have to be a sophisticated marketer to do it. A lot of families who tire of corporate life want to run their own business.

"You see a lot of moms and dads and kids."

How low can you go?

Because they were bored with retirement, Ron and Joyce Flowers opened a discount store 18 months ago in Treasure Island, Fla. The store, Dollar Zone, features 13,000 items from souvenirs to beach toys. All but 15 of them sell for a dollar. Yet, they say, customers still complain about the $2 items.

"We as Americans want to pay the lowest possible price for everything," said Ron, who worked in the supermarket industry before retiring. "We'll pay less for no-brand items."

And we're more savvy, he said, adding, "The Internet has made people smarter about what things cost. I think people are more knowledgeable now than they were before."

Mike Rogers, who works for a company that sells closeout (no longer needed) merchandise for NASCAR, Dodge and GM, said that for many consumers, dollar stores are a quick place to stop -- a cheap answer to convenience stores.

"Convenience stores are really there for gas and tobacco," Rogers said. "And convenience stores with pay at the pump, 60 percent don't go into the store and they're really struggling."

For Rogers' company, MotorHead Products, dollar stores are great for getting rid of no-longer-needed merchandise.

"You can get rid of so much product so fast," he said.

But dollar store competition doesn't make Madge Latneau happy. Latneau, along with her husband, owns C&M Variety, which operates booths at flea markets in Florida.

"They're killin' us and all the stores," Latneau said. "To keep up with competition we have a lot of dollar items. We have to."

Some analysts compare dollar stores to the five-and-dime store of yore, but without the charm. Latneau doesn't even see the comparison to the style of an open-air flea market, where, she says, "Where else can people go barefoot with their dog, with their kids, drinking beer and having a good time?"

And while larger dollar store chains buy directly from China, smaller stores and independents rely on such wholesalers as STK, Kole Imports and Regent Products. STK even helps open stores, averaging 10 grand openings a month, said Eric Concepcion, STK account executive.

Incidentally, Concepcion said, "Our No. 1 selling item is Super Glue. We have 2,000 (items). Super Glue is No. 1."

But wholesalers and some of their low-grade products are pushing businesses such as Fintak's Telstar into a new world of competition, where he knows workers will be underpaid and the lack of regulations and ethics can ruin his original product.

"We work very lean. It's my wife and I, my two sons, two full-time employees and our part-time employees," Fintak said. "We're almost going to be forced to move to China to manufacture the product. It's either that or find a different business."

But in China, they'd face knock-offs, he said, with the same factory making their product, then making more of it to sell to someone else.

"That's why we never went over there," Fintak said. "My own products would become my own competition."

Even Batkiewicz says openly, "We go into PetsMart, buy up some stuff, take it to the Orient and say, 'Can you do that for us?' "

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