Dollarama is on a roll. The dollar store chain is raking in the big bucks, with sales up 11.5 per cent and net earnings per share up 24 per cent in the fourth quarter.
The company is also revising its expansion plans to aim for 1,700 stores across Canada, up from a previous target of 1,400.
With the economy growing at a healthy clip and churning out jobs, you wouldn’t expect a no-frills chain to thrive.
So why do so many Canadians feel the need to roam the aisles of a dollar store?
Higher-income Canadians shop at Dollarama, too
Dollarama isn’t just for low-budget shoppers. Customers the retailer would call typical have incomes ranging from $20,000 to $80,000 a year, company spokesperson Lyla Radmanovich told Global News.
It explains why Dollarama stores have been cropping up in upscale neighbourhoods in Canada’s major cities, where they seem to be able to draw a crowd even alongside high-end butcher shops and the kind of coffee shops that only sell artisanal brews. It also explains why the retailer is now accepting credit cards and will soon welcome American Express.
READ MORE: 5 things you should buy at the dollar store
“People from all walks of life shop at Dollarama,” said Radmanovich.
That may be because even wealthier Canadians enjoy the thrill of bargain hunting.
It may also reflect the fact that, despite recent gains, middle-class wages in Canada have been stagnating.
READ MORE: Where to find the cheapest school supplies
“The average middle-income worker, like the white Bengal tiger, is on the brink of extinction,” retail guru Doug Stephens wrote in his book The Retail Revival: Re-Imagining Business for the New Age of Consumerism.
This is “horrible news” for businesses that “have thrived by delivering an average product or experience to average people,” according to Stephens. But it helps low-cost chains. (Stephens was referring to the U.S. retail landscape in the book but has repeated the same argument when speaking about Canada.)
Dollarama isn’t just any dollar store
Flat-lining wage growth for the middle class and rising income inequality aren’t a guarantee of success for retailers targeting penny-pinching customers.
Analysts who fawn over Dollarama’s earnings results and business acumen haven’t been as excited about some of its competitors.
Many Canadian dollar stores offer a “treasure hunt” kind of shopping experience, Dollarama noted in its 2016 annual report, where you never know what you might find.
Dollarama, though, has focused on making its offering consistent, along with adding some seasonal products. You can walk into any Dollarama and know you’ll always be able to find, say, cheap office supplies. Likewise, you know you can count on some low-cost Santa-themed wrapping paper when Christmas approaches.
That model seems to have played well with Canadians, as has the fact that Dollarama stores, unlike big-box retailers like Walmart and Ikea, have an easier time setting up shop in crowded urban areas.
With home ownership costs eating up over half of household incomes in British Columbia and Ontario, it’s hardly surprising many urbanites are so fond of Dollarama.