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A different kind of dollar store

Smaller format stores are all the rage these days. Dollar General, which already operates nearly 12,000 stores, plans to open 700 more units this year. Walmart recently announced plans to accelerate growth of its smaller format stores by opening between 270 and 300 small stores, more than double the 120 to 150 store range it projected last fall. Even Target has gotten in on the action with plans to open its first Target Express store near downtown Minneapolis this summer.

With some of the nation’s largest retailers relying on accelerated growth of smaller stores to drive growth, one company with a differentiated concept and a downright glacial pace of expansion is called UTBW, an acronym for “Used To Be Woolworth’s.”

Stores operate under the banner of Five & Dime General Store and the closest location to Northwest Arkansas is in Brandon, Mo., adjacent to a Bass Pro Shops.

The Santa Fe, N.M.-based company only has nine stores in an unusual mix of locations such as San Antonio, Kansas City, Charleston, San Diego, Monterrey, Calif., and Savanah, Ga. The company has been deliberating over opening a tenth location in St. Augustine, Fla., for more than a year. Earl Potter, a Stanford trained lawyer turned retail entrepreneur serves as chairman and Mike Collins, a veteran retailer who spent 25 years at Woolworths, is CEO.

The Five & Dime stores and the company itself are throwbacks to an era when retail was a simpler business. The company employs an old school intuitive approach to merchandising and supply chain matters to generate enviable levels of productivity.

“We are not high tech in the sense that we rely on advanced algorithms about where to put our stores or what to put in our stores,” Potter said. “We have no centralized distribution or anything like that, but we have some very experienced people who are old school merchants and very sensitive to what is selling and what isn’t.”

Relying on intuition for purchasing and replenishment decisions is easier to do when stores range in size from 2,500-sq.-ft. to 4,000-sq.-ft. and experienced operators are in place. The company also relies on McKesson to help with health and beauty categories.
“We carry a lot of item that are found in a traditional convenience store, but we will also have some softgoods, hardware, snack food items, toys for kids and items that are locally relevant,” Potter said.

The combination has been effective. Sales last year exceeded $13 million and Potter said sales per square foot range from $400 to $1,000 depending on the location and maturity of the store. And unlike other value oriented retailers who rely on low margin food and consumable to generate traffic, most of the items in the Five & Dime stores carry higher margins.

For the model to work Potter said stores need to be in locations with high levels of foot traffic.

“Our stores are not typically a destination, but the areas in which we are located are destinations,” Potter said.

As a result, the company is very methodical in its site selection to ensure every location generates strong sales and achieves profitability.

“We’re very conservative when it comes to expansion and I’m not sure how many locations will work for our concept. We don’t claim to have something that can be stamped out,” Potter said. “Our model depends on having a closely knit management team.”

 

 

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