Retailers Ride the Wake

Given the ongoing predictions of over-saturation in physical retail, its sheer scale in the U.S. is hard to fathom, with the top three dollar chains alone slated to hang more than 1,300 new shingles in the U.S. this year.

Although some retailers still see plenty of wide open space, others are lured by competitors’ established footprints. Are they stalking or just fishing where the fish are? 


With 4,400 locations, Dollar Tree is the third-largest chain in the mega-scale world of dollar retailing, while Dollar General and Family Dollar, with store counts of 11,000 and 7,000 respectively, certainly have a stronghold on the number one and two spots. In earnings calls, Dollar Tree’s President and CEO, Bob Strasser has been quick to point out the chain’s unique positioning as a “variety store” that takes advantage of opportunistic buys rather than relying heavily on static assortments. This opportunism extends to its real-estate strategy as well, as the company makes no bones about intentionally locating near Walmart or Target stores in order to ensure steady traffic.


Less-discussed sources of physical store growth are coming from portfolio companies opening retail outlets for companies that they have acquired, and from former wholesale brands opening own-brand retail stores. Apple currently operates approximately 400 stores in the U.S., while Microsoft’s relatively diminutive 60-store U.S. scale represents a combination of permanent locations and pop-up stores. It hasn’t been lost on CNET and other consumer electronics media outlets that Microsoft’s stores not only resemble Apple stores aesthetically, but are also located in close proximity in many cases (a recent Retail Wire discussion also explored the motivations behind Apple seeking a trademark for its store designs).


When Gap purchased women’s active sports brand Athleta in 2008, the online and catalog-based brand was tucked under Gap’s internet division. Three years later, Gap kicked off a measured store opening spree for Athleta that put popular niche yoga player, Lululemon, on notice. Although Lululemon’s current store count of roughly 135 stores in the U.S. dwarfs Athleta’s 30 locations, over a third of Athleta’s stores are within one mile of a Lululemon store, with some situated as close as a 12-minute walk away in major markets. Although Gap has claimed that its cozy proximities are a coincidence, given both chains’ relatively modest U.S. store counts, Lululemon could be seen as an annoyed diner seated elbow-to-elbow with fellow patrons despite being surrounded by a room full of empty tables.

As the race for space continues, the biggest challenge for encroaching retailers will be to carve out additive businesses rather than simply diluting the market. In the meantime, retailers with established footprints may need to evaluate the productivity of individual stores as the local landscape evolves.