By Mark Seavy 

In response to the recent struggles at retail—Party City, Big Lots, and the Container Store all recently sought bankruptcy protection—the licensing industry is looking for alternative distribution paths. 

In many cases, this has meant targeting value retailers. As value retail has evolved, however, its definition has become blurred. For some, value retail includes Ross Stores, T.J. Max, and Burlington. For others, it means Dollar General, Dollar Tree, Ollie’s Bargain Outlet, and Dollarama. And then there is Walmart, which has vowed to keep low prices even while it moves to improve product quality.  

In fact, the ongoing competition from Walmart has significantly impacted the value retail landscape in recent months. For example, Dollar Tree is closing 970 of its affiliated Family Dollar stores. But, given the sheer size of the dollar store chains (Dollar General has more than 20,000 locations), they continue to be a go-to choice for licensees to launch programs featuring products designed for that distribution channel. 

Spin Master has launched more than 30 products under the Paw Patrol, Wizarding World, Monster Jam, Gabby’s Dollhouse, Bakugan, and Hedbenz brands with Dollar Tree, Five Below, Dollar General, and Family Dollar. Those brands are expected to generate $20-$30 million in revenue in the fiscal year that ended December 31st, CFO Mark Segal said. Meanwhile, Lifetime Brands launched 50 items through Dollar General last July under its Dolly Parton license, including cook and barware, kitchen tools, cutlery, and tabletop items. 

“In the past we would have a presence in the value chain, but it might have been products we didn’t sell in regular channels,” a Spin Master spokesperson said. “Now we are developing products for the exact price the value chain is looking for. The combination of the growth in the value chain, both in the U.S. and within international markets, combined with consumers trading down in terms of price points has made it a strong channel.” 

In most cases, the products are designed at a lower cost while “delivering play value” in the case of the toy category, the Spin Master spokesperson said. In other cases, however, the distribution channel limits the types of products that can be sold. Footwear supplier GroundUp, for example, sells licensed slippers through Ross Stores and the dollar stores but not sneakers, said Layna Patel, VP of Licensing and Global Partnerships. 

“That The [uf] shortcode requires at least the "name" parameter! is where the growth is right now and that is an appealing channel for a lot of companies that are looking to expand,” said Matthew Kavet, President of licensed candy tin and beverage supplier Boston America, which sells through Five Below, but so far hasn’t entered the dollar store channel. “We would have to develop a whole different line specifically for value and we haven’t done that because of the price competition.” 

The price competition has been felt strongly within dollar stores, which spent heavily on upgrading their locations in recent years. Dollar General, for example, installed food coolers in many stores and introduced a Popshelf format in 2020 in a bid to attract suburban customers. The format features household décor, fashion, pet, crafts, and beauty items for $5 or less. At the same time, big-box retailers were drawing low-income consumers with membership programs. This includes Walmart+ at Walmart, which is half-price for those on government assistance. More than a fifth of Walmart+ members are on food stamps, according to survey results from Evercore. 

“Branded suppliers are very careful about product placement,” said Ollie’s CEO John Swygert, whose chain operates 546 stores in 31 states and plans to open 56 new stores this year, some in former 99 Cents Only locations. “At the same time, the larger order sizes are driving larger production sizes, so there is continuous cycle of excess product. While we are getting larger, other closeout players are shrinking or going away altogether. This is leading to stronger vendor relationships and increased deal flow.”