Update on the 99 Cents Store

Has Canada answered the 99 Cents Question with its $5 Store?

"First, five-and-dimes gave way to dollar stores. Now, inflation pressures are threatening to make the dollar store a thing of the past, too.

Dollarama Group LP, Canada's largest dollar store operator, is set to abandon its "all at $1" pricing strategy at its 536 stores in the new year, the company said yesterday.

After Feb. 1, Dollarama will introduce three new price levels - $1.25, $1.50 and $2 - though it says the majority of items will still sell for $1.

"After 16 years at a dollar, we've found in the last few years sourcing dollar products has become a little more difficult," Dollarama chief executive officer Larry Rossy said in a rare interview. "Meanwhile, during our recent buying trips [to Asia] we were consistently offered 'wow' items at the $1.50 to $2 price point."

Read the full article: Million-dollar question: Are $5 stores up next? Sounds like the the 4.99 idea is spot on. Thanks to our bloggers Per Sjofors and Rafi Mohammed for their thoughts

What Would You Do If...?

If You Were CEO if 99 Cents Only Stores?
As a new feature for our recently launched PPS blog, I invite you to participate and contribute your perspective, on some of today’s real world pricing issues.
Below is the first in this series of “What Would You Do If?
Eric Mitchell,
Founder and Chairman, the Professional Pricing Society.

Ninety-nine cents just doesn't go as far as it used to, and that's a problem for 99 Cents Only. Faced with rising inflation and soaring food prices, the large retailer ,founded in 1982 --- known for never selling anything for more than 99 cents — is re-evaluating its pricing strategy.

According to the LA Times (9/2/2008,) Chief Executive Eric Schiffer said "There's no question we're going to need to do something," said after the company reported its second consecutive quarterly loss. "When you are part of a family that comes up with a concept, sometimes you're the last to admit that it needs to be changed."

99 Cents Only, pioneered the single-price retail concept. It has expanded to 277 locations, mostly in California but also in Nevada, Arizona and Texas.
The deep-discount retailer sells groceries, household supplies, health and beauty products, and it remains one of the few true "dollar" stores.

Competitive Landscape

At discount chain Dollar General , current promotions include $8 backpacks and $2 for a box of Ziploc sandwich bags. Family Dollar Stores, a chain of more than 6,500 discount stores, currently is advertising Glad trash bags for $4.99 and Huggies diapers for $9.99. In fact, keeping prices at a buck or less was never part of the overall pricing scheme at Family Dollar, an large competitor based in NC.

99 Cents Only is able to offer such low prices because of a business model that is "not based on having every single variety of every product out there," said President Jeff Gold.

But lately, the company just can't get a wide-enough or attractive-enough selection of goods that it can turn around and sell for such a low price, Gold said. According to the Bureau of Labor Statistics' inflation calculator, 99 cents in 1982 has the same buying power as $2.26 in 2008.

By capping prices at 99 cents, the chain has had to play around with the quantity and size of its goods, which can confuse customers.

But "The number 99 is a magic number — deviating from that is something we absolutely are not taking lightly," said Gold, "I find significant discomfort emotionally about considering making the change."

OK Pricers ---What Would You Do ? -- If you suddenly were appointed as the CEO of 99 Cents Only.