35-year old Sarah Chan is a fan of value shopping. The Singaporean makes frequent trips to a variety of discount stores peppered throughout the wealthy city state, her favorite being Japan-based chain store Daiso Sangyo which offers products at 2 Singapore dollars ($1.60) per piece.
"I usually stock up on household products, stationery and snacks. Prices are competitive and I love the wide array of items they carry," she said.
Discount retailers, also known as dollar stores, tend to enjoy popularity during lean times with their outlook less clear when economies are recovering. But shoppers like Chan are proving that these bargain stores have a place regardless of economic cycles.
Indeed, the multi-billion bidding war for discount store Family Dollar unfolding in the U.S. is testament that demand remains intact for dollar outlets, not least in Asia where consumers are broadly a price conscious bunch.
Chan, who is a media executive drawing a comfortable salary, describes herself as a practical shopper who loves good bargains. "I visit Daiso stores when I travel to Japan as well. With a weaker yen it's much cheaper than shopping at the outlets in Singapore," she said.
Euromonitor International estimates the total market size of dollar stores in Asia at about $48.76 billion last year and expected to grow 4 percent in the next five years. Honey Lim, research analyst at the firm, says this is healthy growth in a region where popular grocery retailers pose strong competition.
The key for dollar firms, she says, is the ability to remain relevant and possess the right product strategy.
One of Asia's success stories – Daiso – has done well in this regard, Lim says. The store, which was founded in 1972 and popularized the 100- shopping concept in the early 1990s, has caught on well with its fixed-price strategy.
"Fixed-priced dollar stores are popular because they helped set expectation on pricing before customers step into the shops," said Lim.
Daiso's surprisingly "chic" products have also attracted customers. Products like grape grippers, for consumers who do not want to dirty their fingers when eating grapes, is among some of the sought-after products at the Japanese store. "With items like these, Daiso has helped changed the perception of dollar stores as outlets that only cater to low-end consumers," Lim said.
Daiso, which now has 2,800 stories in Japan and 860 outlets in 26 countries, keeps it current by rolling out new items frequently. Of the 70,000 products on its shelves, more than 500 are refreshed every month.
In Singapore, discount retailer ValuDollar reels customers in by keeping its prices competitive, and stocking up on fast-moving foodstuff and daily household items. Unlike Daiso, the firm sells its products at different price points, competing directly with mainstream stores.
"Our customers could be expatriates who are looking for a certain flavors of Kit Kat chocolates which are only available at their home markets, or just regular shoppers who want great value," said Deepak Anandani, spokesperson of ValuDollar.
The substantial savings are possible because ValuDollar imports directly from manufacturers in bulk, cutting out the middlemen. Anandani estimates that prices at his stores are about 25 to 35 percent cheaper compared to traditional shops.
"For example, a box of Ferrero Rocher costs about $9.50 (Singapore dollars) at the local supermarkets; we sell it at $5.95. A 1.5 liter Coca-cola sells at $1.35 in our stores, but costs $1.85 elsewhere," he said.
ValuDollar now has 22 stores in Singapore, since opening its first outlet nine years ago. The firm – which recorded sales of $40 million in 2013, a growth of 15 percent from the previous year – has plans to open at least 4 to 5 more stores within the next year.
To be sure, there have been failures in an industry where razor-thin margins and sizable inventory render firms vulnerable to stiff competition and external shocks in the macro environment. The One99shop in Singapore, a pioneer in the industry which opened 15 branches in its first three years of operation since its launch in 1997, shuttered its doors in 2003 as the SARS epidemic hit the region.
Aggressive pricing by traditional retail stores and the rise of Internet shopping are real threats to dollar and discount stores, says Euromonitor's Lim, who sees consolidation in the sector.
"Dollar stores still have their place. Shoppers are willing to pop in for impulse buys such as drinks or chocolates," she said. But for non-impulse purchases, which could also be found in other channels, dollar stores will need to offer innovative and value for money items, to keep them coming back, she adds.