The Reject Shop’s days of looking like this are numbered as its parent company, Dollarama, has revealed major changes are already happening. (Source: AAP)
Australian shoppers will soon start to notice something a little different when stepping into their local The Reject Shop. That iconic brand, which has been around in Australia for more than four decades, will be slowly replaced with Dollarama.
That’s the name of the low-cost Canadian retailer that bought The Reject Shop earlier this year for $259 million. Dollarama CEO Neil Rossy revealed in a recent call with analysts that shoppers will not only notice an aesthetic change, but also a reduction in prices across the board.
“We are now starting to selectively phase in Dollarama products across categories,” he said.
“Along the way, we will be simplifying the price point structure, including lowering the current pricing ceiling.”
There are more than 1,600 Dollarama stores across the globe, and it’s Canada’s biggest retailer of “items for $5 or less”.
Rossy didn’t confirm if prices would be that cheap at new-look The Reject Shop stores, but indicated they would be coming down to turn the heat up on competitors like Kmart, Big W and Target.
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UNSW consumer behaviour researcher Professor Nitika Garg told Yahoo Finance that consumers will likely be the big winners of this move.
“A lot of households are struggling to make ends meet right now, and the cheaper options are attractive,” Garg said.
“It will give competition to Kmart for this segment because they would look at their options when shopping.
“While the cost-of-living crisis is going on, you can see that it will work.”
Rossy said this won’t happen overnight, but shoppers will start to notice small changes happening within stores during this “methodical” and “slow and steady” approach.
“This will be a gradual process, which will continue through to the end of fiscal 2027,” he said.
“Our plan is to convert store layouts to deliver that convenient and consistent shopping experience we are recognised for, and which directly supports our merchandising strategy.
A general view of a Dollarama logo and store in South Edmonton. On Wednesday, 24 August 2021, in Edmonton, Alberta, Canada. (Photo by Artur Widak/NurPhoto via Getty Images) · NurPhoto via Getty Images
“Conversion projects are already underway, representing an important step towards laying the groundwork before we can ramp up conversions in fiscal 2027 and over an approximately three-year period.”
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He said that each Reject Shop will change its name once it contained a “critical mass” of Dollarama products.
“It will take some time between now and [the] end of fiscal 2027 to really start feeling more like you’re walking into a Dollarama store, is our expectation,” the CEO added.
Rossy also confirmed plans for mass expansion across the country.
At the moment, there are 395 stores with The Reject Shop banner in Australia. But with Dollarama in charge, the goal is to bring that number up to 700 by 2034.
That would mean there would be more The Reject Shop/Dollarama stores than Big W, Kmart and Target combined.
Kmart and Target currently operate 449 stores across Australia and New Zealand, while Big W has 179 locations in Australia.
But Garg told Yahoo Finance that Dollarama would have its work cut out for it if it wanted to take on those big-name retailers in Australia.
UNSW consumer behaviour researcher Professor Nitika Garg believes The Reject Shop expansion could be a win for shoppers in the short-term. (Source: UNSW)
“To really compete against Kmart, or to have a viable business model for the long-term, they would have to change their proposition,” she said.
“Either you increase the variety or you increase the quality… I think that’s the struggle that they will have with the increased store numbers.”
She also questioned how the company would remain profitable with 700 stores and a high level of market competition, but Rossy assured analysts that money would flow eventually.
“As this is a multi-year journey, we don’t expect the business to materially contribute to our profitability until a few years down the road when the heavy lifting is behind us,” he said.
“As a team, we are very excited about these projects and the opportunities that lie ahead across our growth platforms in Canada and Latin America and now Australia to the benefit of all our stakeholders.”
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