Canadian Retailer - Summer 2013 - 37

One of the ways in which value-oriented retailers—Dollarama
foremost among them—are exploiting their growing market
power is by increasing private label activity and the shelf-space
they devote to their own store brands. In the past, private label
or store brands carried the stigma of inferior quality and therefore inspired less trust and confidence in the consumer. That’s
not necessarily the case anymore. Indeed, many stores like
Dollarama have earned the trust of their consumers who are
realizing that the store’s own brands offer equal or, sometimes,
superior value to global brands. And for their part, retailers recognize that private labels also represent high margins and the
promise of profitability with little to no marketing effort.
Ready for the leap?

Partnership and cooperation

Strategic category management is instrumental for a retailer to realize its “own” brand goals
and aspirations. It requires the development of
a symbiotic relationship with manufacturers
and/or suppliers to elevate relationships and
cultivate partnerships. Since Dollarama had already enjoyed strong relationships with its solesource suppliers, the decision to transition to a
partnership with them to ensure the category
listings remained profitable and emotionally
appealing to the customer seemed an easy one
to make. Indeed, the partnerships Dollarama
enjoys with its suppliers are far more than the
traditional retailer-supplier dynamic based on
negotiation rather than cooperation.

Dollarama was already well-placed to make the jump. Indeed,
the decision to expand its private label offerings was simply an
opportunity to build upon what
had always been a key part of “dollarama’s decision to expand their private
Dollarama’s success, which inlabel offerings is not a result of threats from south
cludes the sourcing of merchandise directly, rather than through of the border or a sign of lack of growth. it’s a
wholesalers or other middlemen. natural evolution for a growing business... in fact,
This innovative and creative way there is still room for growth.”
of thinking has helped Dollarama
— JEff DOUCETTE
keep costs low enough to earn a
Sales in Not Simple
profit at the $1 price, and to maintain a diverse and consistent selection of merchandise. By conThese cooperative partnerships may help
trast, competing dollar stores and other discount retailers tend Dollarama as it prepares to face challenges that
to stock their stores with whatever product they can get cheaply will test the company's acumen and ability to conat any given time from middlemen.
tinue adapting to a demanding and fast-paced
Since Dollarama was already sole-sourcing—essentially pri- market. One is competition, in the form of Dollar
vate labelling in all but name—the decision to aggressively pur- Tree Canada, which has ambitious plans to open
sue private label lines was a natural one. And, critically, every 1,000 stores. The two chains will be competing
private label product ensures that Dollarama has complete con- not only for customers, but for retail spaces of
trol over everything related to that line from production and roughly 10,000 square-feet in a real estate landpackaging to marketing, and all other points in between. It also scape that is tight, with a 1 per cent vacancy rate.
allows the company to address consumers’ needs and wants
The other widely-cited challenge facing the
rather than depend on manufacturer’s existing products for suc- company is the fact that Dollarama appears to be
cess cues. The Dollarama Annual Forecast touches on this point: “approaching the point of saturation” in Canada.
“We carry a substantial number of private brand items. We beDespite these challenges, however, Doucette
lieve that our success in maintaining broad market acceptance of insists that Dollarama's decision to implement
our private brands depends on many factors, including pricing, private labels so robustly is not a result of corporquality and customer perception. If we do not achieve or main- ate pressure or concerns over competition. Rathtain our expected sales for our private brands, our business and er, its a decision borne of innovation and strategy.
financial results could be materially adversely affected.”
“Dollarama’s decision to expand its private
Jeff Doucette, a principle in Calgary-based consultancy Sales label offerings is not a result of threats from
is Not Simple has long been impressed with Dollarama’s recipe south of the border or a sign of lack of growth.
for success, and has written about the company on several oc- It’s a natural evolution for a growing business.
casions. “Dollarama has been able to identify the niches they They have reached almost 800 stores (8 times
can do well in. Their seasonal merchandise, for example, is the that of any other dollar store in Canada, incibest executed of any retailer in Canada, large or small, and they dentally) and are now at the size when they
dominate party supplies and gift supplies,” he explains. “Many do decent volumes, making private labels a
of the private labels the company has chosen to unveil are in sensible proposition. In fact, there is still room
these areas—as well as value-priced housewares and kitchen for growth. The population per dollar store in
items—they already dominate.”
Canada is half that of the United States and the

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