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Discounters Rev Up Retail

With retail bankruptcies continuing to mount — Blockbuster and Borders Group are the latest, leaving hundreds of storefronts vacant — new development has retreated into an eerie calm. It’s the rare shopping center being planned anywhere today.

Some merchandising experts predict it could be years before the U.S. marketplace requires new sales space. With $5 a gallon gasoline a new reality in some locales amid sharply higher prices at grocery stores, many observers fear that consumer spending for apparel and electronics might soon evaporate.

Yet despite the doomsday talk, a nascent optimism is taking hold in retail as one merchant after another prepares ambitious expansion programs not seen in several years. Much of the expansion comes from discount retailers. Dollar General plans up to 650 new U.S. stores this year, Family Dollar 300 stores, and Save-A-Lot, 100 stores, according to a new report from the Terranomics division of Atlanta-based ChainLinks Retail Advisors. The women’s wear retailer Ross Dress for Less plans 60 stores.

That discount stores, and notably the dollar branches, are leading the expansion charge comes as no surprise to John Melaniphy, a Chicago retail consultant who follows the discount sector closely.

“No matter what economists say, we’re still in a recession and just gradually working our way out of it,” he observes. “Price is a very important factor in retail everywhere. Everybody wants to grab a piece of the frugal shopper market. That’s where the action is.”

The U.S. retail sector overall is on track to outpace 2010 sales, according to Terranomics. In early 2010, retail chains planned 13,500 new stores and shops, the lowest level in a decade. This year the outlook is for 21,000 new stores, nearly matching the 2007 total, though still 16% off the frothy peak of 25,000 new chain stores in 2006.

CVS is opening 275 stores. Indianapolis-based electronics retailer hhgregg is moving into empty Circuit City stores around the Midwest and Southeast as it opens 60 stores this year and plans hundreds more in coming years. Wal-Mart will open nearly 400 stores in North America over the next 30 months. Many are downsized boxes in cities like Chicago and New York.

“This is shaping up to be the biggest year in retail expansion that we’ve seen in 20 years,” says Garrick Brown, research director for Terranomics.

“Wal-Mart alone is looking for 50 new store sites in just Los Angeles. There’s something major going on.”

Continue reading at NREIonline.

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