Why dollar stores are popping up all over Delmarva

(Delmarvanow.com) -- If you were one of Lois Kacin's 11 grandchildren, you'd know exactly where you were buying your parents' Christmas gifts this year: at Dollar General, the one on the flank of Mardela Springs.

"They just feel like they're in heaven because $10 goes a long way here," Kacin said.

She stopped by the store Thursday afternoon for a less-festive cause: to pick up kitty litter, cat food and toiletries. She shops there at least three times a week, she said, because it is conveniently close to her home in Hebron.

And she is partial to the clean, inviting atmosphere.

Dollar stores are shedding their low-rent image and appealing to consumers up and down the income scale with rock-bottom prices and convenience, retail analysts say. As a result, Dollar General and its ilk are bucking the brick-and-mortar retail sector's skid.

“It’s probably one of the few bright spots in retail today," said David Naumann, vice president of marketing for the national consulting firm Boston Retail Partners. "It’s by far the hottest segment.”

The trend has been so pronounced on Delmarva, it has reordered the landscape, particularly in small towns.

Many communities heretofore untouched by significant commercial development now have the glow of a dollar store's marquee to compete with their lone stoplights.

Within the past few years, the openings having included Dollar Generals in Mardela Springs (population 351) and Pittsville (1,445). The overall number of dollar stores has increased from 24 to 29 in Wicomico, Worcester and Somerset counties since 2009, according to public business listings.

The dollars are still raining down.

Among just Dollar Generals, new stores are wending through the development pipeline in Sharptown (population 652) and Willards (997). Another is under construction in Westover, an unincorporated area where the Census counts 3,100 denizens across a sprawling, rural portion of Somerset County.

The chain's exclusive developer in the region said the company has a "very aggressive building program" in Maryland and southern Delaware. The influx of Dollar Generals in small towns hearkens to the days when at least one five-and-dime store could be found in such communities, said Howard Crossan, president of Pocomoke City-based Oxford Chase Development.

"Like anything in life, it just gets recycled," he said.

Retail kingpins such as Sears and Kmart have suffered in recent years as consumers have increasingly turned online for their purchases. Amazon's much-ballyhooed two-day shipping service, though, has struggled to meet its self-imposed deadline in the far-flung places that dollar stores are flocking to, said John Feeney, vice president of the Boulder Group, a national brokerage firm that specializes in retail properties.


In rural America, dollar stores have thrived because they offer buyers basic goods within a short drive of their homes, he said.

"You’re not going to get a Wal-Mart in a town of 2,500 people, but a Dollar General or Family Dollar is going to do well there," Feeney said. “They are there to be the national retailer for convenience goods that hasn’t been there from a national standpoint.”

Westover is just one of those places. Owing to its centralized location within Somerset, it is home to several government facilities, including two schools, the sheriff's headquarters and the health department's main office.

But it is nestled in a stretch of tree farms and cornfields between Crisfield and Princess Anne that retail developers have historically eschewed. The new Dollar General will draw customers from a "trade area" measuring 20-30 miles, Crossan predicted.

Nationwide, Dollar General plans to open 1,285 new stores this year, up from its forecast of 1,000 at the beginning of the year. Dollar Tree and Family Dollar, which merged in 2015, are on track to open 500-600 locations.

“They're really expanding, especially now into these smaller markets," said Feeney, adding that larger markets have held less promise because they're already saturated with shopping options.

To put the growth of dollar stores in perspective, consider this: This year alone, Macy's announced it is closing 68 stores, Sears and Kmart shuttered a combined 180 stores and plan to close another 150 by the fall, and J.C. Penney shut down 138 stores.

While big-box stores continue to age, their small-box counterparts are investing heavily in new construction. Dollar General's plans this year also include remodeling or relocating 760 stores.

At dollar stores, "customers can also get in and out quickly," said John McClellan, a senior advisor with SVN Miller Commercial, a Salisbury real estate firm. "The typical big box store carries thousands of items — many which may sit on shelves for months."

On Delmarva, several dollar stores have jumped to new locations in recent years. In most cases, the motivation has been to trade space in a strip mall for the greater visibility offered by standalone stores, Crossan said.

In Fruitland, a Dollar General's move seemed counterintuitive on its face. Why, after all, would a retail store want to leave a Food Lion-anchored strip mall on well-traveled Route 13 for a standalone building in the neighborhood location of West Main Street and Camden Avenue?

According to the retail's research, 98 percent of the previous location's shoppers came from that neighborhood, Crossan said. And operating from its own building ensures that a dollar store isn't encumbered by any restrictions on what it can sell, set by its landlord or anchor-store tenant.

Oxford Chase Development used to be in the business of raising a variety of shopping centers on the Eastern Shore, Crossan said. It developed the Lowe's shopping center in Pocomoke City, for example.

But it has focused solely on Dollar Generals in the past five years or so. Crossan said he and his colleagues are so busy with those projects, they don't have time for anything else.

The roots of the dollar store's revival lie in the Great Recession, Naumann said.

”I think people started to be more cost-conscious because they had to. That probably helped these off-price and dollar stores to thrive," he said.

For these customers, and millennials specifically, Naumann added, "it just became a habit.”

For their part, dollar stores cleaned up their act. One of the watershed moments in Dollar General's evolution came in 2012 when Standard & Poor's upgraded its rating one notch to BBB-minus, elevating it to "investment grade."

With investors now more inclined to back its endeavors, the company began securing its properties with 15-year leases. That added layer of security lured more real estate investors to take bets on constructing fresh, made-to-order stores for its tenant, Naumann said.

Dollar General also has started taking responsibility for snow removal and other maintenance at its properties.

“They want them to look the same whether it is in Viriginia or in Iowa," Feeney said.

The boom has been fueled by the expansion of dollar stores' customer base, Naumann said. They're not just for bargain shoppers anymore.

“There used to be a stigma probably of walking into a discount store," he said. "But people I talk to, even wealthy people, (ask) 'Where did you get that?' 'Oh, I got that at the dollar store.'"

Kacin, as it happens, hears that a lot.

"I shop here all the time," she said just before she headed from her car to the Mardela store's glass front door. "You can see I've got their clothes on."

© Gannett Co., Inc. 2017. All Rights Reserved


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