While inflation weighs heavily on household budgets, a Quebec retailer offers prices “40 to 50% cheaper than Walmart and Amazon,” concludes a survey conducted by Desjardins. Who is it ? Dollarama.
Posted at 6:30 a.m.
Desjardins came to this conclusion by analyzing the prices of 221 items sold in all categories, except food, in July. In his opinion, the Montreal company maintains an “attractive price gap” with the two American giants known for their low prices. It’s the least we can say.
Significant differences were also noted between Dollarama and Canadian Tire in the two aisles scrutinized. Cleaning products (-48%) and seasonal, gardening and outdoor items (-65%) are notably cheaper at Dollarama stores.
About fifty health and beauty items were compared with those sold at Shoppers Drug Mart (Pharmaprix in Quebec) and the difference amounts to 60%.
The secret behind Dollarama’s low prices: its private labels, which occupy about 70% of the space on the shelves, estimates Desjardins.
“In most cases, we believe the quality is on par with the big brands and reflects the retailer’s ability to leverage their strong supplier relationships to source good quality products at attractive prices, a key competitive advantage,” writes analyst Chris Li.
Desjardins agrees, however, and with good reason, that the brand is important for certain products, particularly in the health and beauty category. That said, you can easily find the same brands of shampoo, body or hand soap and toothpaste at Dollarama as at the pharmacy. The same goes for the food aisle, which has grown steadily over the past few years.
On Wednesday, Statistics Canada informed us that the price of food jumped 8.8% in June, compared to the same month in 2021. Many households are therefore looking for bargains and replacement options, which explains in particular the popularity of private labels, as I wrote in June.
Under these circumstances, is it financially advantageous to drop by Dollarama to get quinoa, Cheerios, cookies or French ketchup? Desjardins asked the question, even if the result of its analysis of 56 foods was not included in its overall conclusions in order to better “highlight the strong value proposition of Dollarama” in the other categories.
It shows that Dollarama is 2.4% cheaper than Walmart, 16.1% cheaper than Amazon and 11.1% cheaper than No Frills, the equivalent of Maxi in English Canada. The gaps are smaller than in the other aisles due to the strong presence of national brands.
The statistics still show that a detour to Dollarama to complete your grocery basket can be worth the cost. An observation that the Narcity site also draws up in a series of texts attesting to bargains, photos of the prices of competitors in support.
I’m already hearing the comments about food offerings in “$1” stores, and the fact that price shouldn’t be the only selection criteria.
So I insist: no one claims that you can find all the vitamins necessary for a healthy diet there and that the olive oil is of the same quality as that, organic, sold seven times more expensive in a specialized shop. . There are also a lot of urban legends about the healthiness and harmlessness of the products sold there, but it turns out that there are no more recalls at Dollarama than elsewhere.
The Matane-born retailer is obviously not in an airtight bubble sheltered from any inflationary surge. Its costs are rising and this is reflected on the shelves.
Desjardins notes that in all categories except kitchenware, price differentials in favor of Dollarama are eroding due to an average price increase of 6% since November.
In its sample of 277 periodically reviewed products, which includes food, 97 sell for more. And in April, 25 were more expensive than in February. Chris Li talks about a catch-up.
Such a comparison exercise is obviously not perfect and Desjardins is aware of this. But everything has been done to find the best possible comparables, we swear. In addition, the analysis is based on the regular price of the products in addition to taking into account the differences in quantity and size of the products.
It is still impressive that Dollarama manages to beat Walmart and Amazon on the low price field. Investors have long recognized the tight and efficient management of the Quebec company. While this drives up the share price (+29% over the past year), the Rossy family’s business model also makes it possible to maintain advantageous retail prices.