How Dollarama became the retail king of knockoffs

Selling cheap imitations of more expensive brands has turned Dollarama into one of Canada's most successful retailers, earning it big bucks and plenty of lawsuits

The difference between a classic Dixon yellow pencil and one made by Dollarama is a matter of fine print. They both have green bands near the eraser; they both read “HB” and “#2,” and they both come in translucent packages, sharpened.

While Dollarama has always created knock-offs, it is now selling spitting images of brand name products. Mock-up Milk Bones for dogs, almost-Advil medication for headaches, might-be Mars bars for snacks and supposed-to-be SoftSoap for bathrooms: the store sells knockoff products for much cheaper than it sells name brands, earning it a higher profit margin and helping turn Dollarama into a near $3-billion a year company. While some brands are brandishing their swords and taking the store to court, critics say Dollarama is mostly getting away with mimicry.

“I think they have good lawyers working for them,” says David Lipkus, a lawyer specializing in anti-counterfeit in Toronto, who has helped clients sue businesses in Canada selling knock-offs. “Often retailers make mistakes and end up selling fakes.” Many lawsuits are settled privately, but the store has been sued by Nike, for selling counterfeit footwear emblazoned with Nike’s iconic basketball player silhouette, and by Umbra, a home decoration company, for selling a style of waste basket. In February 2017, Dixon Ticonderoga launched a suit against the dollar store chain for a pencil it’s been selling since 2002.

When browsing the aisles, could a “casual consumer in a hurry” accidentally pick up the Dollarama pencils believing they were buying Dixon? This is the legal test that Dixon—or any company—must prove to show that Dollarama has infringed on a trademark or patent. When Canada updated its counterfeit laws in 2015, the changes were supposed to lead to a crack-down on imitations, particularly by empowering customs officers to seize imports before they make it to market. However, customs officers have seized fewer than 50 shipments in the past two years, while American customs officers seized 36,500 in 2016 alone. Lipkus blames apathy by law enforcement. “We’re what appears like a third world country compared to our counterparts,” he says.

RELATED: Why Canada is a haven for knock-off goods

Dollarama, which began in Montreal in 1992, has long been associated with selling nameless miscellany, such as bags of fluorescent yellow popcorn or toys with long life expectancies in landfills. Now a company with a stock market cap of more than $13 billion—it’s shares are up 1,070 per cent since it went public in 2009—and with more than 1,000 stores across Canada, Dollarama still sells some knock-offs that wouldn’t confuse consumers, such as a desperate version of My Little Pony called “Fancy Horse,” with packaging reading, “shiny mane!” and “sparkling wings!”

However, the knock-offs are taking off. The store sells a toy that looks identical to Lego, with blocks that fit interchangeably with the authentic stuff, and a bottle of “Spa Soap” inscribed with the font resembling that of SoftSoap, complete with a graphic of fish. In the store’s pet section, dog walkers can pay $3 for name brand PoopySacs, or they can pay half the price for the copycat version, Poopy Sac.

“There are differences,” argues Michael Ross, chief financial officer for Dollarama. “We’re not trying to trick the customers,” he says. “It’s not that we have a department in setting ups schemes.” The store sources its products from countries ranging from Turkey to Thailand to Saudi Arabia, and Ross says the house products give consumers more choice. “If we were confusing or frustrating customers then we’d be shooting ourselves on the foot,” he says. “Then they [wouldn’t] come back for Dollarama anymore.”

So why sell pharmaceuticals with the same-coloured packaging as Advil or dog treats called “Mr. Bone?” Ross says, “we’re putting it in a format so they know what it is.”

The company also sells name brand products, charging $3 for Lysol wipes, for example, which cost $5.30 at Wal-Mart. The company keeps prices low by minimizing overhead costs, with no advertising and stores without frills. However, the company can make a higher profit margin off look-a-like versions of products—which some customers actually prefer.

“For a while they had a fruit cake from Poland that I liked,” says Michael Anderson, a customer in Toronto who says he has spent thousands of dollars at the store. With a $50 gift card, he’s recently bought fizzy water that resembles Perrier and no-name insoles for his shoes. A retired property manager, he also bought artificial ceramic tiles to renovate his neighbour’s bathroom.

Instead of Beats by Dr. Dre headphones, another customer was shopping for $4 headphones by Dollarama. “I think they’re not high quality but something just for when I go over to the library,” says Andrew Schmid, 47, who says he likes the variety in the aisles. “You’ve got candy on this side, earbuds on that side.”

For all its mimicry, Dollarama doesn’t like to be copied itself. In 2015, Dollarama launched a suit against a store called Buckstop. Though it eventually dropped the case, it accused the competitor of imitating its logo.

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