`Dollar' store chains are catching on in Mexico

October 23, 2005|By MARLA DICKERSON

MEXICO CITY -- As sales gimmicks go, "11.3 pesos" doesn't quite have the ring of "99 cents."

But Mexican shoppers such as Jaime Plata don't seem to care. Savings, not slick marketing, draw him to Waldo's Dolar Mart de Mexico, this nation's largest chain of so-called dollar stores.

On a recent afternoon, the nightclub owner trolled the aisles of a Waldo's store in the capital's middle-class Anahuac neighborhood. Bottles of apple juice, at two for 11.3 pesos, or about $1.05, were piled in his cart, along with candles and picture frames.

"They have a wide variety, and the prices are tough to beat," said Plata, who said he visited the store at least three times a week.

One-price retailing is winning converts south of the border as Mexicans discover the joys of snagging mini-blinds, underwear and a six-pack of root beer for about a buck each. Like their American cousins, the Mexican chains offer food, beauty products, cleaning supplies and other staples, along with a grab bag of name-brand goods and novelties.

How about a six-character nativity scene, complete with all three wise men, for 11.3 pesos?

"There is magic in selling a $3 item for $1," said Filiberto Jimenez, director general of Waldo's, whose stores are already stocked with Christmas merchandise. "If you can do that consistently, you've got yourself a business."

The format is still in its infancy here, with fewer than 1,000 stores nationwide compared with more than 17,000 in the United States. Dollar stores have multiplied rapidly in the U.S., with nearly 5,300 locations added from 2000 to 2004, a 46 percent jump, according to statistics from AC Nielsen.

America's largest chain is Tennessee-based Dollar General Corp., with more than 7,600 stores. Other players include Family Dollar, Dollar Tree, Fred's and Commerce-based 99 Cents Only.

Dollar stores are small, convenient and quirky -- in contrast to retailers such as Wal-Mart Stores Inc. with their gigantic parking lots, cavernous buildings and mass-merchandised sameness. The one-price stores rely on suppliers' close-outs and overstocks. Many customers find the ever-changing inventory irresistible.

Although half of U.S. households with incomes above $70,000 shop at dollar stores, bedrock clients are working-class households with large families. That customer profile fits well into the demographics of Mexico, where nearly 60 percent of workers earn less than $250 a month.

Most Mexican workers toil in the informal economy and get paid by the day. Mexico City retail analyst Marc Monsonego said these low-income people were intimidated by giant club stores that require them to pay membership fees and buy products in bulk.

He said dollar stores, with their tidy displays and layouts that let customers get in and out quickly, are snazzier versions of mom-and-pop stores where millions of blue-collar Mexicans shop.

Waldo's is Mexico's largest chain with 180 stores, including its recent purchase of 23 Solo un Precio (One Price Only) stores from Grupo Carso.

Competitors include El Mundo de 3 Pesos (3-Peso World) with 155 stores, La Tienda de Dolar (The Dollar Store) with 40 shops and El Punto Magico (The Magic Point) with 40 stores.

Waldo's pricing isn't as arbitrary as it appears. Mexico charges a hefty 15 percent value-added tax on most non-food items. So that 11.3 pesos comes out to exactly 13 pesos once the tax is applied.

Marla Dickerson writes for the Los Angeles Times.

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