Franchising, retail, business
06/12/2017 - Dollarama Inc. will dip its toes into e-commerce next year offering a collection of popular items in bulk as the Canadian discount retailer responds to customers clamouring for bigger volumes of goods than it carries in stores.
The Montreal-based dollar store chain confirmed Wednesday it will begin selling goods by the case online some time over the next 13 months, tightening up a previously vague timeline for the effort. The aim is to cater to clients looking to buy a big batch of things, such as party planners looking for $1.25 wine glasses or schools that need cheap notebooks.
"We're trying to satisfy a new need with this [online] platform," Dollarama chief executive officer Neil Rossy said on a conference call following the company's release of third-quarter results. "Hopefully, our customers that haven't been able to buy the quantities that they wanted in our stores without going store to store will be happy to use this new tool to satisfy that need."
Mr. Rossy is leading Dollarama on one of the most remarkable runs in the history of Canadian retailing as the company's sales and earnings growth continue to defy the trouble lashing much of the rest of the industry. It now has 1,135 locations across the country selling merchandise at prices up to $4.
The dollar chain once again beat analyst earnings forecasts for its latest quarter, reporting an 18 per cent climb in profit from a year earlier, to $130-million or $1.15 a diluted share. The average customer spent 4.5 per cent more per transaction, helping the company book a 9.7-per-cent rise in revenue, to $810.6-million.
Dollarama shares fell 2 per cent Wednesday on the Toronto Stock Exchange, as investors digested management's conservative guidance for fiscal 2019. They've gained about 23 per cent over the past three months.
The company's success has come, in part, from the fact it has so far evaded direct competition from giants such as Wal-Mart Stores Inc. Meanwhile, it has picked off business from specialty retailers, such as pet shops and craft stores.
"He's very, very much a threat," Marc DeSerres, chief executive of Montreal-based arts supply chain DeSerres, said of Mr. Rossy in a recent interview. "But he munches at the bottom [of the retailing price scale] … I've had to adjust and bring in $2 canvasses."
Dollarama is setting up its e-commerce offering with the aim of adding incremental business, not cannibalizing sales from its bricks-and-mortar stores. It will offer only a select number of products that make sense to sell in cases, said company spokeswoman Lyla Radmanovich.
"It's a very complementary strategy to what they currently offer in stores," said Brittany Weissman, an analyst with Edward Jones in St. Louis, Mo. "Part of what makes the Dollarama shopping experience unique is that treasure-hunt type of experience and that's not really something you can replicate as much online."
Whether Dollarama's online offering brings it more squarely into the sights of Wal-Mart, Costco Wholesale Corp. or even Party City remains to be seen.
Dollarama is piloting its e-commerce effort with institutions such as schools, giving the heart of the business a different focus than more traditional individual consumer retailing, said Tal Wooley, an analyst with Eight Capital in Toronto. The initiative is responding to a need its customers have articulated rather than trying to create new demand, he said.
"Their opportunity cost here is not high," Mr. Woolley said. "Basically, instead of taking a case and shipping it to a store and then having it go to a bunch of different customers you're just going to take a case from your warehouse and send it direct to the customer."
Dollarama's initial guidance for fiscal 2019 calls for gross margins of between 38 and 39 per cent of sales and EBITDA margins of between 22.5 and 24 per cent, lower than expectations for the current 2018 fiscal year. (EBITDA represents earnings before interest, taxes, depreciation and amortization.) The company expects to open 60 to 70 new stores, the same as this year.
- NICOLAS VAN PRAET
Fonte:https://www-theglobeandmail-com.cdn.ampproject.org/c/s/www.theglobeandmail.com/amp/report-on-business/dollaramas-profit-rises-as-shoppers-spend-more/article37219842/
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