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In an increasingly competitive market, what’s a dollar store to do, to stand out? How about offering more coupons, sales – and cigarettes?

Dollar General this week spooked investors and pleased shoppers, by expressing concerns about its sales figures and saying it plans to ramp up promotions in order to boost business during the holidays. “Our performance over the Thanksgiving weekend and start of the holiday season has been encouraging,” said CEO Rick Dreiling. “However, we continue to be cautious for the remainder of the year, given the competitive environment.”

That competitive environment includes players like Family Dollar, Dollar Tree and Walmart, which Dreiling noted have all been using “more coupons”, “promotional activity” and “outright price decreases”. So if you can’t beat ’em, join ’em – Dreiling indicated that Dollar General would likely go the same route, by reducing prices on consumables like coffee and cereal. “This is a pre-emptive, defensive move by Dollar General,” food marketing expert Richard J. George told RetailWire, “to protect it from suffering the erosion of business that supermarkets and drug stores have experienced as a result of the Walmart pricing offensive.”

Tobacco is part of the plan, too. After testing tobacco products in select markets, Dollar General plans to offer them nationwide next year. It’s a bid to increase foot traffic by bringing tobacco users into the stores, a move that Family Dollar first made last year. “Tobacco has gotten a lot of great traction,” Family Dollar’s CEO said recently, noting that more than half of customers who come in for cigarettes and other tobacco products end up buying other items as well. Dollar Tree, the only dollar store where things really do cost just a dollar or less, does not offer tobacco products – with the price of a pack of cigarettes ranging anywhere from around $5 to $12 these days, the only way Dollar Tree could possibly offer cigarettes while keeping with its dollar-or-less pricing, would be to sell them individually.

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As for the other stores’ decisions to add tobacco products, “I think it’s a smart idea; it’s what the customer wants,” an analyst told the Tennessean newspaper, noting that the dollar stores’ own research shows that their customers are more likely to smoke than the national average. Anti-smoking advocates, predictably, are not so pleased. “That’s disappointing news,” the Foundation for a Smoke-Free America’s Patrick Reynolds told the Tennessean. “People like to shop where they feel the management has integrity, and not where they feel management just wants to make a profit without regard to the health of their customers.”

Just a day after Dollar General‘s announcement, a report from the anti-tobacco group ClearWay Minnesota lamented the easy availability of tobacco products – and coupons. “Tobacco companies’ aggressive coupon marketing tactics may reduce the likelihood that current smokers will quit,” the organization said in a news release. Its study found that nearly half of smokers reported receiving coupons for cigarettes from tobacco companies, and 80% of those who received them, used them.

Since both Dollar General and Family Dollar accept coupons, that means tobacco users could save even more by buying their tobacco products at the dollar store. Bad news for anti-tobacco activists, but potentially good news for the stores – according to the Tennessean, some reports say selling tobacco products boosted Family Dollar’s average store sales by as much as $1,000 a week. Dollar General could stand to benefit from a piece of that action.

But Dollar General‘s CEO acknowledges that it could be just a short-term boost. “It’s a dying category,” Dreiling said, “that’s going to feel really good for about a year.”

Then what? As dollar stores continue trying to encourage customers to spend in a shaky economy, that will be the big question.

2 Comments

  1. Regina Stanford says:

    Do you sale maverick cigarettes. and how much they cost. Per package

  2. Do you accept paypal as a form of payment? And how does it work in your store?

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