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article imageDollarama to introduce $3 items as part of 'natural evolution'

By Andrew Moran     Jun 14, 2012 in Business
Toronto - Dollarama, one of the largest dollar stores in Canada, is set to introduce $3 items in the coming months. Already raising prices on much of its dollar items, its CFO says it can offer higher quality and a wider range of products.
In this economy, dollar stores, particularly Dollarama, serve everyone. Upon walking into Dollarama at its Yonge and Charles Streets location in midtown Toronto, you will see everyone: rich, poor, old, young, businessmen and waiters.
Another aspect a customer would notice is that a large chunk of the items that used to be $1 have been raised to $1.25, $1.50 or $2. Well, don’t be surprised over the next several months to see $3 goods, the company announced in a news release.
"Customers have responded very well to our multi-price point strategy and additional price points provide us with an opportunity to strengthen our value proposition," said Larry Rossy, Dollarama chairman and chief executive officer. "By selectively introducing items at $2.50 and $3.00 starting in August 2012, we will be able to enhance our customers' shopping experience while staying true to our dollar store concept and our commitment to offering compelling value."
The Montreal-based company was coy to speak about the specificity of its future products, but in an interview with the Globe and Mail, Rossy said this latest move is not to fight the inflation rates in China, which the company receives more than 50 percent of its products from, but rather a “natural evolution” to expand its selection.
“It’s just nibbling, to see if we can satisfy more customers with the same shopping experience. We’ll see where it goes,” said Rossy. He provided an example, in which the company will now start to sell one-piece infant sleepers and noted if it would be sold at $2 it would be poor quality, but if it’s sold at $3 you can have a more efficient product.
Despite the steady jump in prices, customers do not seem to care. According to first quarter numbers, items worth more than $1 accounted for more than 51 percent of sales. Furthermore, average value transactions have increased from $6.50 four years ago to $8.
Expect to see even more Dollaramas over the next five years. Rossy told the Toronto Star that there is room for an additional 50 stores per year across Canada. It won’t expand into the United States, though, as Dollar Tree recently reported record quarter numbers.
Even as Target Canada establishes its operations next spring and Wal-Mart announced its intentions to sell $1 items, Rossy said Dollaramas near a Wal-Mart still do better business because a consumer does not have to walk 100,000 square feet to find a simple item.
In 2009, Dollarama, which maintains more than 700 stores, became a publicly traded company. Recently, Dollarama shares briefly hit an all-time high of $61.23 during a trading session on the Toronto Stock Exchange. First quarter profits rose 40 percent to $42.6 million.
More about Dollarama, Dollar store, Business, Michael Ross, Larry Rossy
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