Family Dollar turns to 'sin items' for growth

There was an interesting story in Forbes on Tuesday about Matthews-based Family Dollar's increasing reliance on so-called "sin items," such as cigarettes, to sustain growth in the face of fiercer competition.

Family Dollar cigarette display

Since the recession, Family Dollar and its competitors, such as Dollar General and Dollar Tree, have enjoyed a major period of growth. Their sales have soared to record levels, they've added thousands of stores, and they're preparing to open thousands more over the coming years.

The reasons behind the dollar store boom are myriad. There are more people in poverty or struggling, and there are more people willing to "trade down" the stores they shop at to save money. The dollar stores have added better-quality items, and thousands of different items such as food, to drive repeat trips. Larger discount competitors, such as Wal-Mart, stumbled, and with more locations, dollar stores benefited from being closer to home in an era of rising gas prices.

But now, competition is heating up, especially from Wal-Mart. The world's largest retailer is opening more small-format stores, and that means dollar stores have to come up with more ways to lure customers. Enter alcohol and tobacco. As an analyst is quoted saying in the Forbes piece: “Any time you’re selling liquor or tobacco, it’s another reason to go into the store, (they're)...addictive repeat purchases.”