Many well-known retailers have closed their doors in the wake of the coronavirus pandemic -- and that has real estate investors worried. Widespread store closures could lead to massive mall and shopping center vacancies, resulting in lost revenue. Throw in the fact that many major brands are also sinking more resources into digital sales than in-store sales, and it puts malls and shopping centers in a pretty precarious position.
But thankfully, there's one breed of store that's managed to thrive in the course of the pandemic -- discount stores. And now, a number of discount chains are making plans to expand.
While many retailers saw in-store sales drop in 2020 and early 2021, dollar stores have thrived. Consumers have been drawn to these stores due to their ever-changing selection, large array of staple items, and, of course, competitive price point. And given the number of Americans who lost their jobs during the pandemic or had to ease up on spending, these stores have actually been a lifeline.
But dollar stores aren't just holding steady -- they're looking to truly take over shopping centers across the country. In fact, about 45% of the 3,597 store openings that large U.S. retail chains have announced so far this year have been dollar store chains -- notably, Dollar General (NYSE: DG), Dollar Tree (NASDAQ: DLTR), and Family Dollar, according to Coresight Research.
In fact, Dollar General has plans to open a whopping 1,035 new stores in 2021, while Dollar Tree intends to open 393 new locations and Family Dollar will open q98. All told, 1,626 discount stores are slated to open this year, and that's apt to be a boon to shopping centers.
While dollar stores don't anchor shopping centers the same way supermarkets or department stores can, they're still a viable source of revenue -- and, based on the aforementioned numbers, a steady one at that. And while it's easy to argue that dollar stores will lose their appeal once the pandemic is far behind us and the U.S. economy improves, let's also remember that a thriving economy means no more stimulus checks. As such, consumers will no doubt continue to search for discounts in the absence of being handed extra money.
At a time when inflation alone is threatening so many people's finances, dollar stores offer solid value to shoppers who are budget-minded. And there's also the threat of higher taxes on corporations. If those tax rates increase, consumers will pay the price in the form of more expensive goods, leading many to seek out discount store alternatives when possible.
The Millionacres bottom line
All told, there's reason to be optimistic about the future of dollar stores, and the fact that so many major brands are expanding is a positive thing for shopping centers in particular. The events of the past year may have rattled real estate investors to their core, but the promise of discount store expansion should be enough to give them some much-needed peace of mind.