Formerly perceived as a dumping ground for remainders, dollar stores have increasingly become a viable channel for new books, particularly in lower-end children's categories such as coloring and activity titles.
Many dollar stores regularly feature at least three to six feet of books—typically a mix of remaindered and new. "It's a very decent category for us," reported Mark Mio, assistant v-p and franchisee at Dollar Castle, a 19-store Detroit-area chain.
Dollar Castle carries new coloring and activity books from Paradise Press and Kappa Books year-round, supplemented by new and closeout storybooks and other children's formats, especially during the school year. It also has a selection of adult titles, mainly closeouts, receiving a shipment of 750 to 1,000 books every 30 to 40 days. "We sell a lot of them," Mio said.
With more than 220 outlets in California, Nevada, Arizona and Texas, 99¢ Only Stores devote varying amounts of space to books, depending on inventory. "No quantity is ever too big or too small," said book buyer Jill Birnbaum. The chain carries everything from coffee- table books and cookbooks to coloring and activity lines from Bendon and Modern Publishing. "We're eager to expand the category," Birnbaum added.
Coloring and activity books work especially well; a book can retail for 99 cents in a dollar store compared to $2.99 or $3.99 for a very similar book elsewhere. Ben Ferguson, president of Bendon Publishing, reports that dollar stores—including the four largest chains, Dollar General, Family Dollar, Dollar Tree and 99¢ Only—represent as much as 25% of the company's business.
For Paradise Press and other producers of inexpensive coloring and activity titles, dollar stores often account for the bulk of sales. "When you have over 7,000 stores [as Dollar General does], you move a lot of product," said Paradise's v-p Randy McDonald.
Larger publishers are eyeing this channel as well. "Any sales opportunity is an important sales opportunity today," said Stephen Weitzen, senior v-p and publisher of Simon & Schuster's merchandise division. "Margins are very tight in that business, but they're good retailers, there are a lot of stores and it's actually a sale as opposed to a lend." (Dollar stores buy books on a nonreturnable basis.) Simon Scribbles, the company's new coloring and activity imprint, will make books for all channels, from dollar stores to trade booksellers.
Ipsos BookTrends estimates that 8% of book buyers in 2004 purchased at least one title in a dollar store, and that 0.3% of all dollar sales and 2.2% of all unit sales of books occurred in dollar stores that year, according to Barrie Rappaport, chief analyst.
In addition to buying on a nonreturnable basis, dollar stores have relatively short payment terms and often require less stickering and fewer special displays than other channels. But their main attraction is their enormous buying power; the top four chains alone operate well over 16,000 stores. The segment also has been one of the fastest growing in retail of late, with the top 10 chains adding more than 7,000 stores in the past five years, according to Retail Forward.
With this growth has come an improved reputation. Stores are cleaner and better lit, and have improved their merchandise offerings. "It used to almost be shameful to do business at the dollar stores unless it was truly a remainder business or a closeout business," Ferguson said. "But now they have first-quality goods, and they're nice places to shop." Rather than targeting only low-income Americans, as in the past, dollar stores have become mainstream, attracting all demographics.
Even licensors—always protective of their brands' image—are starting to authorize sales into this channel. "They recognize that this is probably the fastest-growing retail outlet now," said Ferguson.
Not all children's publishers view dollar stores as a viable opportunity, however. School Zone, for example, has chosen not to pursue this business because of the small margins. Still, like many other children's publishers, School Zone is keeping an eye on dollar-store developments.
While volumes are high, margins are low, and it can be a challenge to create workable products. Although some chains carry multiple price points, many sell everything for a dollar—or even two or three for a dollar—and a dollar remains the magic number for books. "To meet their price points, it's a struggle," said Ferguson. "They still require a real good quality."
"It's no longer a place to dump merchandise," agreed Andrew Steinberg, president of Modern Publishing. "They want the same service as other stores. They want the newest, they want what's hot, they want it to look great. They know what licenses are working, and they want things that are on the way up. They're looking for whatever everyone else is looking for." In general, size matters. "The bigger the book someone can purchase for a dollar, the better," said Ferguson.
Dollar stores' success has led other retailers, from drug chains to discounters, to add dollar sections, often at the front of the store. Wal-Mart has a Pennies-n-Cents section, while Target launched The 1 Spot. "Nearly every chain we work with has a dollar section or is investigating running a dollar section, either permanently or on a temporary promotional basis," said Ferguson.
While dollar stores' low margins aren't for everyone, this channel should continue to drive more new business, especially in children's categories. Its growth and buying power are difficult to ignore.
