Dollarama is Challenging the Traditional Grocery Store Model

In an era where the cost of living continually surges, the pursuit of affordable groceries has evolved into a financial battleground for many Canadians. Recent investigations by intrepid reporters in Quebec and Ontario have uncovered a revelation that may surprise some: Dollar stores, most notably Dollarama, provide the same non-perishable products as regular grocery stores but at significantly lower prices – often 30% to 75% lower. While many shoppers were aware of this, many likely were not. But this begs the question: How is this possible? How can Dollarama offer these products, in the same size and from the same brands stocked at grocery stores, at a much lower price?

The answer is different business models, full stop. Dollarama’s ability to offer rock-bottom prices is underpinned by two critical pillars: remarkably low operational costs and robust supplier-retailer relationships. While one might assume limited variety, exemplified by having only one option for ketchup or peanut butter, the reality is that the products are indistinguishable from those found in major grocery chains. This might appear counterintuitive, but the key lies in Dollarama’s dominance over supplier shelf space in its vast network of over 1,400 stores.

Suppliers recognize the advantages of collaborating with Dollarama. They no longer need to contend for limited shelf space or engage in cutthroat competition with rival brands, making it an appealing proposition for them. The result is beneficial deals that ultimately trickle down to the consumer’s advantage. Suppliers can also sidestep concerns about how grocers may prioritize their in-house labels. Dollarama’s house-brand strategy is not strong.