Since their inception in the 1950s, dollar shops have proliferated all throughout the United States, appearing in both rural and urban areas. However, it seems that their quick expansion is coming to an abrupt halt as its low-income clientele grapple with issues like inflation, reduced government assistance, and other issues.
Since their inception in the 1950s, dollar shops have proliferated all throughout the United States, appearing in both rural and urban areas.(Photo : by Justin Sullivan/Getty Images)
Dollar Tree's Store Closure Strategy
On Wednesday, Dollar Tree announced that it would close around 1,000 Family Dollar locations, accounting for 15% of the company's total store closures.
Additionally, it intends to eliminate around thirty of its own Dollar Tree-branded stores. The firm has identified unprofitable sites as a result of food stamp cuts and inflation that have negatively impacted its client base.
According to analysts, Dollar Tree retailers are facing challenges from customers who are more prone to look around for deals following two years of occasionally painful inflation.
In an email regarding Dollar Tree's problems, Neil Saunders, managing director of GlobalData, stated, "Over recent years, rates of shopping around have increased, and we believe that they will only increase further in the years ahead as other chains like Walmart, Aldi, and Dollar General continue to expand."
According to retail data source Coresight, Family Dollar had planned to add over 300 locations as recently as December 2023. However, Family Dollar consumers are spending less money at the stores, and theft is increasing in certain areas, according to business executives who made the announcement of the closures on Wednesday.
Customers' wallets have been emptying due to recent changes to the food stamp program, known as the Supplemental Nutrition Assistance Program, or SNAP, which has increased the pressure on consumers to find deals. Concurrently, grocery prices have increased by 25% since the epidemic began.
Challenges and Strategies at Dollar General and Dollar Tree
Customers have been "a shock[ed] by the inflationary environment we've lived in for the last couple of years," Dollar General CEO Todd Vasos stated during a conference call on Thursday.
The difficulties at Dollar Tree, which paid $8.5 billion to acquire Family Dollar in 2015, stem from the latter's difficulty in persuading customers to stick with them, according to Saunders.
Family Dollar has also had some high-profile issues, such the rat infestation in its warehouse that led to a $42 million punishment from the Department of Justice.
According to a Food and Drug Administration assessment, the warehouse had "four rat carcasses on the conveyor belt" and "too many rodent droppings to count" among other unpleasant issues.
Saunders pointed out that the businesses weren't very inviting to customers, which prevented them from developing a devoted following.
According to him, the closures represent "Family Dollar effectively running up the white flag of surrender in the value grocery battle. Despite some recent investments in price and attempts to make stores more pleasant places to shop, Family Dollar remains a laggard in the value segment."
