We recently highlighted Dollar Tree’s major acquisition of Family Dollar, in an attempt to gain greater market share away from industry giant Wal-Mart. However, there is a savvy lesson to be taken away from the Dollar Store business model, a little known revenue stream with extreme financial benefits.
While the acquisition, which is estimated to be worth around $8.5 billion, will undoubtedly strengthen supply chain and distribution channels for Dollar Tree’s now 13,000 stores in the U.S. The merger also provides Dollar Tree the convenient locations that have become vital due to the economic times and the shift in shopping patterns for millions of americans.
The interesting piece is in the strategic placement and purpose of Dollar Stores around the country. Dollar Tree and other dollar stores function with an added revenue stream not connected to retail sales whatsoever.
Dollar stores often purchase run down or out of date strip malls in populated areas, completely renovate and update the surrounding retail space and rent out the space around one of their “Dollar Tree” locations.
Not only are the dollar chains attracting potential businesses to the area with newly renovated space, but an added result of this is an influx of customers who are more likely to stop in at a Dollar Tree or Family Dollar if they can shop or eat at surrounding restaurants and businesses and get a number of things done at once. All the while, the Dollar Tree’s of the world not only generate profits from their in store sales, but also from their ownership of prime retail space and increased foot traffic from potential customers in the community.
An organization of this magnitude does little by accident, next time you see a new “Dollar Tree” count the weeks until additional retail stores,restaurants and other businesses start popping up around it.
Business savvy of this magnitude make it easy to see why Dollar Tree’s CEO, Bob Sasser, was rewarded with a salary totaling more than $7.2 million in 2013 (According to Forbes).
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