Posted on 04/11/2024 2:41:10 PM PDT by george76
Here's a look at what's gone wrong at both chains..
These are tough times for two big US dollar store chains. In the past month, Family Dollar said it will close nearly 1,000 stores and 99 Cents Only said it will go out of business.
Both companies said inflation and shoplifting have contributed to their troubles. While inflation has pressured the companies' low-income customer base and shoplifting has squeezed their profits, those factors alone can't explain their difficulties.
Years of strategic mistakes and underinvestment have plagued Family Dollar and 99 Cents Only, retail analysts say. Both brands were acquired by other companies and faltered under their new owners.
Family Dollar has around 8,000 stores mostly in cities, and the chain has struggled since Dollar Tree bought it in 2015 for $8.5 billion. Dollar Tree believed acquiring Family Dollar would help it compete against larger rivals. But it misjudged the deal.
Since the "botched acquisition," Family Dollar "has caused Dollar Tree nothing but hassle," Neil Saunders, managing director of GlobalData, said in a recent note to clients. "Basically, almost ten years on, Dollar Tree is still sifting through the mess it inherited and has not been able to completely turn around."
99 Cents Only, a chain on the West Coast and Texas, has also suffered from missteps, including stores that were too large and inefficient to run.
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Family Dollar will close 600 locations this year, and 370 stores over the next several years as store leases expire. These locations are unprofitable for the company
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Family Dollar's woes date back more than a decade. Messy stores, high prices and over-expansion plagued the company
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In 2014, activist investors- including Carl Icahn and Nelson Peltz - pushed Family Dollar to sell itself. A year later, Dollar Tree bought the company.
At the time, Dollar Tree was smaller than Family Dollar. While Dollar Tree and Family Dollar share similar names, they have different strategies.
Dollar Tree is mostly suburban, and caters to middle-income shoppers with party supplies and knickknacks. It acquired Family Dollar - which sells more basic foods and household essentials - to grow with lower-income customers in urban and rural areas.
The combined company hoped that by joining forces it could grow its customer base, reduce costs and fend off bigger retailers like Dollar General, which is located primarily in rural areas.
But analysts say the match between the two different chains was a poor fit, and Dollar Tree has struggled to manage the larger Family Dollar store base.
"When Dollar Tree bought Family Dollar, they didn't really know what they were doing," D'Arezzo said. "They didn't know how to run Family Dollar."
Family Dollar stores were in worse condition than Dollar Tree management expected, and early strategies to improve sales, such as selling beer, fell short.
Many Family Dollar stores were located too close to each other and cannibalized each other's own sales, too, D'Arezzo said.
"Family Dollar's sales have been sputtering, hurt by neglected stores, poor product selection and unhappy workers," The Wall Street Journal reported in 2018. Family Dollar "needs more work than the company originally thought."
A year later, an activist investor pushed for a sale of the "underperforming" Family Dollar business, and Family Dollar announced it would close 390 stores.
Even though Family Dollar has renovated thousands of stores in recent years, many stores are still poorly maintained, analysts say. Family Dollar was hit with a record $41.6 million fine by the Justice Department this year for violating product safety standards after selling items that were stocked in a rat-infested warehouse in West Memphis filled with live, dead and decaying rodents.
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99 Cents Only said that it filed for bankruptcy because "the last several years have presented significant and lasting challenges" in retail, including the impact of the pandemic, inflation and rising shoplifting.
But 99 Cents Only's challenges stem back further. The retail chain has not been profitable since 2015.
The company has more than 370 stores in California, Nevada, Arizona and Texas - 265 of which are in California. It was taken private in 2011 in a $1.6 billion leveraged buyout, and the company took on even more debt in the following years to stay afloat.
At the time of the deal, 99 Cents Only had the second-highest profit margin and the most sales per square foot among its rivals
Same here. I hit several Dollar Trees, depending on where I happen to be. Some DT stores are nicer and better-stocked than others. But, I don’t buy as much there now, ever since they raised their prices.
OTOH, I never shopped much in Family Dollar or Dollar General. Sometimes they have good deals, but usually they don’t.
Next to go will probably be “Big Lots”...can’t recall all the discount stores that went down the tube...but a few of them were White Front, Zodys, Two Guys, Newberrys, Woolworths, Kresge/Kmart, Sprouse-Reitz....
If you religiously shop at dollar stores, are you guilty of idollartree?
FYI from northern Ohio, a rural county 60 miles east of Cleveland:
Within a 4 mile radius of my house I have 3 Dollar Generals, two Dollar Trees and two Family Dollars.
One of these FDs is brand new, opened a year ago 500 feet from an established DG. This new FD is closing already, with going out of business sales.
Meanwhile, DG has opened a DG Market store in what was considered a “food desert” area. That makes 4 DGS and one FD.
As an aside, the DG closest to me frequently has charged more than the shelf price on at least a few items per trip. The price readout on the register is conveniently aimed at the cashier, not the customer. You won’t know you’ve been overcharged until you have your receipt on the way out!
“I’ve studiously avoided Family Dollar and Dollar Tree because I didn’t want to feel unfaithful to good ol’ Dollar General.”
I thought I was the only one.
I mainly buy hair/health/hygiene products. Their batteries are A++++++, cheaper and I’ve never had one leak!
Plus they always have Pecan Sandies.
In a decade or two these stores will be called “The $99 Store”.
I love our family dollar! I hope it doesn’t close. We have a wonderful manager, and almost every employee has been there for 8-9 years.
Dollar Generals are popping up like mushrooms after a storm in my area - there are 3 in my small town alone. They are generally reasonably clean, well organized and sell a lot of useful stuff cheaper than WalMart. Never been in a Family Dollar but have heard they are generally a mess. And Dollar Tree (now Dollar Twenty-Five Tree and counting) has become the unofficial Teacher Supply Store, where elementary school teachers buy cheap little prizes and candy to bribe their hooligans to not kill each other.
That it’s all rinky-dink garbage might be one of their problems.
No, not really. Five and dime stores carried all kinds of stuff but they never made everything cost the same like the 99 cent stores did.
I’ve had the same exact experience at Walmarts in NC. I even took photos of the shelf prices. At first they would perform adjustments; later they acted like they I was the problem.
I even told them how particular items had been incorrectly priced for months. They did nothing and the shelf prices remained incorrect, so i stopped buying those items from them. All I wanted was to be told the truth while shopping the items.
“The Dollar General near me is also doing fine, but, their PRICES are NOT much different than Walmart and Kroger.. in many cases they are slightly higher comparatively speaking”
I know this thread is dead but I need to back you up on this. I grew up in a grocery store and I am a power shopper who has compared and watched prices all my life, and you are exactly right when it comes to the food items.
I was already to the point I only bought a few certain items from the .99 cent store because they were cheaper. Walmart and Kroger were actually cheaper on all the other food items.
The difference is now not even worth the extra gas to make the extra stop. I now pay a little more for those few items but the savings in gas by not going there too makes up that difference.
And I watched them do this to themselves over time with some bad pricing and shrinkflation decisions that pissed off customers. And it actually started before the economy went bad. They were already losing customers because of their practices before the economy tanked.
Marketing wise they pulled some dumb stuff incrementally over time that already had them on the downhill slide.
One of my daughters works part time at a Dollar General.
On the FM road I live on, which stretches just over 32 miles (East to West), there are 5 Dollar General stores, alone - not including the gas stations, or the Kroger at the far East end.
Each one is busy, profitable, and I drive about 1 mile East to get to the nearest one, but my daughter works at the one about 7 miles West.
family Dollar charged the same as walmart, or a few pennies more. Had they kept their prices down, even a few pennies less than walmart, they might have remained in business. Same with Dollar General. I go where the deals are. Apparently, others do, too.
They sold queer gear, didn’t they? That’s why I don’t enter any Target store.
They sold queer gear, didn’t they? That’s why I don’t enter any Target store.
If it happened in your state and mine, it doesn’t sound like a coincidence. Other people have had the same problem. It sounds like Walmart is hoping the customers won’t notice the higher price ringing up.
“Dollar General seems to be doing fine.”
DG has rapidly expanded in rural Georgia, and I wonder if the new locations will cannabalize sales from the existing ones. They are convenient, as you wrote, and seem to have a steady stream of customers buying a small number of items.
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