In 2009, a Salvadoran entrepreneur, inspired by the model of North American 1 dollar stores, decided to start his store with the promise of offering quality products at low prices in Latin American countries. Little by little, with a lot of patience and determination, he began to expand his brand to different countries in the region, convinced of the potential of the business model he was building. Today, his company has more than 400 stores, generates more than 4 thousand jobs, and has a turnover of more than 1.2 billion dollars annually … How did he achieve it?
Dollarcity Case: How an entrepreneur build a commercial empire with low-cost stores?
This story is divided into two parts. The first began in 1992, when Larry Rossy, a Canadian businessman, inherited 20 stores in Matane, Quebec from his father. His vision was simple, but ambitious: to provide customers with high-quality products at low prices. What began as a few modest stores under the concept of “everything for $1” would become a retail giant in Canada, called Dollarama.
Over the next two decades, Dollarama grew exponentially. Their focus on offering more than 6,000 innovative products at affordable prices resonated with Canadians from coast to coast. Dollarama stores multiplied in metropolitan areas, medium-sized and small cities.
Its business model, which allowed customers to purchase individual products or in volume at fixed prices, proved to be a success and would soon be replicated in other countries.
The second part of this story begins in 2009 in El Salvador, the Central American country that is characterized by its majestic beaches and mountainous landscape. There, entrepreneur Marco Andrés Baldocchi Kriete, inspired by the business model of North American low-cost stores, such as Dollarama, decided to start his store under the Dollarcity brand. His purpose was to adapt this model, which already worked well in countries like the United States and Canada, to the characteristics and needs of his country. However, the challenge was enormous, because in Latin American countries consumers often associate low prices with poor quality.
The first Dollarcity opened its doors in the Metrocentro shopping center in the city of San Salvador, the capital of the Republic of El Salvador.
From the beginning, Dollarcity was a resounding success. The wide variety of eye-catching products and the surprisingly low prices meant that the first store could not cope, which motivated Marco Baldocchi to establish new stores of his brand in other strategic points of the country.
“We are a company of Central American origin, dedicated to adding value to our customers through good quality products at an excellent price in an agile, efficient and humane approach… We have revolutionized the retail industry in the market with our assortment of products, clean and orderly environments and, above all, the passion and commitment of our teams.” -The company states on its website.
Consolidation and expansion of Dollarcity in Latin America
In 2013, the Canadian company Dollarama set its eyes on the Latin American market because it saw it as a great investment opportunity taking into account that the profitability in sales per square meter was much higher than in Canada.
In order not to have to start its foray into Latin America from scratch, Dollarama chose to reach an agreement with Dollarcity to boost its growth in the region. The agreement included the possibility of Dollarcity purchasing Dollarama starting in the seventh year, a period in which both companies would analyze the market potential and make projections of the required investments.
After successfully consolidating itself in El Salvador, and with the support of Dollarama, Dollarcity began to explore other countries in the region to expand.
In 2015, after an exhaustive market study, the company chose Guatemala and Colombia as its next destinations.
In Guatemala, the first dollar stores were established in the Expobodegas, Metronorte, Plaza Muxbal, and Roosevelt shopping centers. During the following years, the company was responsible for opening new stores in all the main cities of the Central American country.
In Colombia, the company opened its first stores in the city of Cali in its “stand-alone” formats, which are characterized by being large, easily accessible commercial spaces with a wide variety of products. Later, Dollarcity stores would expand to Bogotá, Medellín, and many other cities in Colombia, becoming one of the most popular stores in the country. Colombia quickly became one of the most important markets for the Salvadoran company.
“Without a doubt, Dollarcity has established itself as one of the most relevant and important multinationals in the country. It is a benchmark in our segment. Since its arrival at the Santafé shopping center, it has contributed to the increase in visitor traffic given its positioning in the mind of consumers, thanks to the everyday products they offer.” -Andrés Hernández , general manager of the Santafé Shopping Center , in Bogotá , Colombia .
Meanwhile, in Canada, Dollarama continued on the path to success. In 2016, Larry Rossy handed the reins of the company to his son Neil, after 43 years of managing the company. Under Neil‘s vision, Dollarama would increase its efforts to expand outside of Canada and bring its promise of quality, low-cost products to diverse markets.
Dollarama buys Dollarcity and helps expand the company
By 2018, Dollarcity continued with its expansion plans, reaching 169 stores established between El Salvador, Guatemala, and Colombia.
In 2019, Dollarcity surpassed 200 established stores and already had a team of more than 2,000 people, consolidating itself as one of the most important retail chains in the region. These impressive results, achieved in just 10 years, made Dollarama accelerate its investment plans in Latin America and advance the purchase option of Dollar city.
After several meetings, the successful Canadian chain agreed to acquire 50.1% of the Dollarcity company for 95 million dollars. This acquisition had a clear objective: to enhance the growth of Dollarcity in Latin America.
“Our strong performance speaks to a commitment to providing the best year-round value on the everyday products we offer, combined with a convenient and consistent shopping experience.” -Said Neil Rossy , president of Dollarama (parent company of Dollarcity ), in an interview for the newspaper La República .
Dollarama and Dollarcity formalized the acquisition in July 2019, with ambitious expansion plans that included opening more than 225 new stores in Latin America over the next five years.
So that Dollarcity would not lose its direction, it was agreed that Marco Baldocchi would continue to serve as president of the subsidiary company.
The strategic union between Dollarama and Dollarcity marked the pinnacle of success for both companies. Dollarama, with its experience in the retail market, provided knowledge and resources to strengthen Dollarcity ‘s position in Latin America.
The combination of these two retail giants allowed them to offer consumers a broader selection of products at competitive prices while maintaining their accessibility and high-quality customer service.
In 2021, Dollarcity entered Peru, opening its first location in MallPlaza in the Comas district, in the city of Lima. Since then, it has not stopped growing in Peruvian territory.
By the end of 2022, Dollarcity reached a total of 440 stores, of which 261 were in Colombia, 89 in Guatemala, 66 in El Salvador, and 24 in Peru.
According to a report published by MarketScreener, Dollarcity ‘s sales increased more than 14.9% in 2022 compared to the previous year, achieving a total turnover of $1,289.6 million.
Throughout 2023, the Salvadoran company Dollarcity, in partnership with Dollarama, has focused on continuing to expand, not only to capital cities but also to small cities in strategic locations, thus opening new markets in places with little presence of renowned stores.
The ambitious project of Dollarcity and its founder Marco Baldocchi seems to have no limits. Their stores, under the “one dollar store” concept, generate more than 4 thousand jobs and hope to reach countries such as Mexico, Ecuador, Costa Rica, Honduras, Nicaragua, Panama, and Argentina in the coming years.
As for Dollarama, the company has a market value of more than $25 billion and operates more than 1,500 stores in Canada. In addition, it continues to explore investment opportunities in other countries to carry out its successful business model. Although initially all its products were sold for 1 dollar or less, over time the price range has increased until reaching 5 dollars, which is the current maximum price.
Keys to Dollarcity’s success
What are the keys to Dollarcity’s success? Below, we share some of them:
- An attractive value proposition: Promising high quality at low prices is, without a doubt, a very attractive value proposition, but at the same time it is a difficult proposition to fulfill. In the case of Dollar city, its founder was clear that, to achieve success, he had to overthrow the paradigm that a low price is synonymous with poor quality, which is why he has focused on selecting in great detail the products he adds to his inventory and working mainly with own brands to reduce costs, thus ensuring that consumers are truly satisfied with their purchases and are left with the feeling that cheap is not always expensive.
- Knowledge of customers and their needs: Although Dollarcity was born inspired by the North American low-cost store model, its founder understood that he had to adapt the proposal according to the characteristics of the consumers in his country and the other countries in which it has been established. been expanding. For example, before arriving in a new country, the company carefully analyzes market prices and the purchasing power of consumers to determine the types of products it will offer and the price ranges it will handle. Also, it makes great efforts to know and anticipate the needs of its customers to offer an attractive product inventory. Thanks to these efforts to understand the market, customer comments are often read on social networks stating that Dollarcity knows what they want before they know it themselves.
- Extensive product catalog: The company manages various product lines that include decoration elements, school supplies, beauty products, art supplies, office supplies, cleaning products, glassware, food, beverages, pet food and toys, hardware and gardening products, electronic devices, and baby items. This wide variety of products, all low-cost, means that customers spend a good time inside Dollarcity stores looking section by section to try to find that thing that they didn’t know they needed, but that they will surely want to take. To guarantee this extensive catalog of products, the company maintains a form on its website that allows any person or company to apply as a supplier. The company is in charge of analyzing the information of the potential supplier and determines if their products fit with Dollarcity ‘s value proposition to include them in its inventories.
- Constant product renewal: Dollarcity ‘s loyal customers agree that every time they visit the store again, they find all kinds of new products. For the Salvadoran company, it is essential to constantly rotate its inventories to generate recurring purchases, which is why it does not miss the opportunity to take advantage of the different commercial seasons in each country, such as Halloween, Christmas, or the back-to-school season. Thanks to this constant renewal of products, platforms such as YouTube, TikTok, Facebook, and Instagram have been flooded with videos in which content creators recommend the new Dollarcity products that they find interesting, which has contributed to popularizing the brand organic and effective.
- Strategic locations: Marco Baldocchi, founder of Dollarcity, knew that it was essential to locate his stores in strategic locations, which is why, in the beginning, while consolidating his brand, he always tried to locate himself in large shopping centers in capital cities, thus guaranteeing a constant flow of visitors. Now that his brand enjoys great recognition, the businessman has ventured to establish independent stores and reach smaller cities, thus expanding the scope of his business. On the company’s website, there is also a form from which Dollarcity receives proposals for land that may interest it due to its size and strategic location to establish new stores in the different countries where it has a presence.
- A consistent brand: As a brand grows, it is very easy to lose focus and consistency, especially when you want to replicate the success factors of other brands in the sector. In the case of Dollarcity, the company has been able to carve its path with authenticity and consistency. For example, while most stores use typical black and white price tags, Dollarcity designed its labels using its representative colors yellow and green, which have positioned themselves in the minds of customers as synonymous with low prices. Also, while many stores use psychological prices ending in 9 or 7, Dollarcity has opted for a round pricing strategy that customers love because it makes it easier for them to do the math. In these aspects, it is evident that Dollarcity is not afraid to break molds and create its own rules, which has helped build a solid and authentic culture around its brand.
- Strategic alliances to grow: The alliance between Dollarama and Dollarcity was a key step in the growth of both companies. On the one hand, Dollarama achieved its objective of successfully entering a profitable market such as Latin America; and, on the other hand, Dollarcity obtained important resources and experience to consolidate its presence in the region and improve its product and service offering. Now both companies have great goals for the future to continue expanding throughout the world.
Thus we conclude the fascinating story of Dollarcity, a Salvadoran company that was born inspired by the low-cost store model of North American countries, but that knew how to adapt the model to the characteristics and needs of Latin American consumers, thus becoming one of the retail chains most important in the region and positioning itself as a benchmark in innovation in the retail sector.
