Even large discount retailers, among the most profitable locations in the bulk vending industry, are struggling these days.
A recent announcement by Dollar Tree that it is purchasing rival, Family Dollar, highlighted the problem of lagging sales. According to press reports, the deal between Dollar Tree and Family Dollar is valued at some $8.5 billion and will create a chain of around 13,000 stores in 48 states and five Canadian provinces, and more than $18 billion in sales. Insiders see the move, which comes in the wake of Family Dollar closing more than 300 locations, as a way to position the company against its next largest rival, Dollar General.
Even mega-retailer Walmart is not immune to the downturn. In May the discount giant reported its fifth straight quarter of negative sales. And, more recently, Walmart announced that the chief executive of its U.S. division, Bill Simon, was stepping down to be replaced by the head of the company's Asia division, Greg Foran. The company is betting big that the 53-year-old New Zealander can add new life to the company.
"Greg is one of the most talented retailers I've ever met. His depth of knowledge and global experience will bring a fresh perspective to our business," said Walmart president and chief executive Doug McMillon. "His passion for fresh food, experience in general merchandise and commitment to e-commerce will help us serve our customers even more effectively for years to come."
Wall Street may be cheering the news of dollar store mergers -- Carl Icahn is said to likely earn in excess of $180 million from a merger deal -- but lagging sales and foot traffic have left bulk vending operators wondering where the quarters are for their machines.
WALMART FUTURE? Walmart is aggressively downsizing its operation with the addition of smaller stores to gain access to lucrative urban markets.
One hint to the answer of this question may be found in big box retailers' strategy. Walmart has announced plans to speed up the rollout of smaller outlets like Walmart Neighborhood Market and Walmart Express. The company now has approximately 350 neighborhood markets, with more opening in the coming year. According to company filings, the smaller retail operations are seeing increased sales of more than 4%. Target also has announced the debut of TargetExpress that will boast a small 20,000-sq.ft. imprint.
As these mega-merchants march toward the smaller and urban outlet concepts in search of increased profits, bulk vending operators are almost certain to follow.