Friday, March 15, 2024

A tale of two dollar store chains


It's interesting to note two seemingly conflicting news reports:

So one chain expands, while another contracts.  Both serve the same target market.  What's going on?

I think it boils down to the old saw in real estate:  location, location, location.  As far as I can tell, Dollar General has tended to put its stores into "nicer" areas, with less local crime and safer travel.  That lower crime rate has also helped minimize shrinkage in the stores.  Family Dollar and Dollar Tree, on the other hand, appear to have focused on lower-cost real estate, saving them money on putting in more stores, but exposing them to the risk of greater losses through increased local crime rates and customers who find it more difficult (i.e. less safe) to get to them.  As the second report linked above put it:

Dollar Tree said shrink remains "elevated" and would lower the company's profitability going forward. On the company's earnings call Wednesday, company executives said shrink had been accelerating.

I'm willing to bet that the stores Family Dollar and Dollar Tree plan to close will include those with the highest shrinkage rates.

Both chains complain that customers are hard-pressed to cope with rising prices:  indeed, the "dollar store" moniker has recently become the "$1.25 store" or "$1.50 store", and at present rates of inflation, that's likely to continue to rise.  Chains that can accommodate such cash-strapped consumers are likely to do better than those that can't.  I notice Walmart is putting more emphasis on lower-cost food and clothing in local stores, and I suspect it's taking business away from the dollar stores by doing so.

Companies that are quick on their feet in responding to our present problematic market will do better.  Those that move more slowly, or make the wrong guesses as to the future of retail . . . not so much.



Jonathan H said...

Don't forget that Dollar General has never been anywhere close to $1 for everything; the others at least used to make that their focus.
This higher level pricing gives them more leeway when prices rise and hurts expectations less then for stores that made a big deal of certain price levels.

Anonymous said...

In our small community we have one Dollar Tree and multiple other
"Dollar"stores. My take is that a cake mix at Dollar Tree is now $1.25, can of Campbell is $1.25 yet Wally is $1.48 and at the other dollar stores it higher than our local Walmart and other 3 others kinda large ones. Inflation has done this. DT is always busy and others not so much. So let's give Joe a pat on the back for his wonderful reduction of inflation he brags about.

lynn said...

Doesn't Dollar General tend to be more rural than Dollar Tree ? There are Dollar General stores all over Texas in little towns of 300 people or less. But the Walmart is 30 miles away so DG tends to take care of immediate needs. Without the pain of gasoline sales.

Fredrick said...

There are also reports of the I pact of product recalls on earnings.

Anonymous said...

You’ve overlooked that Dollar General is Family Dollar. As much as I enjoy watching the Grauniad stumble, they appear to have this correct:

So another factor may be that where DG and FD are to close, the “stepchild” gets the raw deal.

JustPeachy said...

If my area is anything to go by, yes, DG tends to be more focused on lower-crime locations than FD. Dollar Tree is usually in big strip malls, where those others tend to be freestanding stores in more residential areas. Both DG and FD focus on putting stores in places where there's nothing else close by-- they're not as cheap as WM, but if you live 20 minutes from WM there is gonna be a DG right around the corner when all you need is a laundry basket and a gallon of milk and WM is not worth the hassle. But in the really bad parts of town, it tends to be a Family Dollar, and not a Dollar General. So they probably did go all-in on the cheap real estate, and are now getting picked clean by shoplifters. FD does also have rural locations, and I'd bet those are the ones sticking around. When we lived 30 minutes outside of town and the only retail in our neighborhood was a combo gas station/pizza hut... it was DG that put in a store right across the highway.

Aesop said...

Hereabouts we also have the 99 Cents Only Store chain.

Except since COVID, they've become the __.99 Only Store.
$1.99, $2.99, $3.99, etc.

But there's only 3% annual inflation, because Dopey Joe's minions say so, yesiree.

And pigs will fly.

Anonymous said...

Dollar Tree and Family Dollar are part of the same corporation. Dollar General is a separate corporation.

Anonymous said...

I recall "dime stores" (aka "five and dime", etc) kept the moniker long after most everything in the store cost more than a dime. But I miss those places - the "Dollar" versions weren't/aren't quite the same.

Jonathan H said...

We have a Family Dollar and a non brand small grocery store in town here... And nothing else for at least 50 miles in any direction; the nearest Walmart is 55 miles West (south the nearest WM is 400 miles away!).

Anonymous said...

"Shrinkage"? You mean, theft by evil people who choose to be parasites. Don't repeat the enemy's lies lest you give aid and comfort to the enemy. What penalty/punishment do you think these thieves deserve?

Texas Dan said...

DG serves the rural market to their success. Now whether or not we should celebrate a place where rural EbT folks can get largely overpriced goods and their prepackaged or frozen unhealthy foods is another matter.

Anonymous said...

In my area FD decided, very foolishly, to match DG and build a store as close as possible to the DG. In some cases next door. Some aren’t completed when they announced the closings. It’s like, what were you thinking?

markm said...

In the smallest town I know well, Manton, Michigan, there has long been a Family Dollar at the south end of town, where the road from the Amish community meets old US 131 (Manton's real main street). I just checked online, and it's still there and has been joined by a Dollar General within about 300 feet, apparently in the old video store - and that's even though the Amish built their own grocery store way out in the country and have a better place to shop for food now.

But the small grocery store in between the two went bankrupt 10 years ago, and AFAIK it's still vacant. The supermarket in the center of town is gone 20 years, and the building is no longer recognizable. There is one other place in town to buy food, "Acme Mini-Mart", which is a Shell station.