America's dollar stores are Amazon-proof retail powerhouses
Dollar stores are thriving in the ailing US economy.
As people tighten their purse-strings at a time of persistently high inflation, they’re turning to dollar stores for more than just for knick-knacks like holiday decor and party favors. Shoppers are frequenting these stores for essentials—especially modestly priced food and beverages.
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“We are aggressively expanding our offerings of protein, pizza, breakfast items and family sizes at price points [to] meet their budgets,” Michael Witynski, the CEO and president of Dollar Tree, a nationwide chain, told analysts in the company’s most recent earnings call on Nov. 22.
Contrary to their name, dollar stores don’t just price everything at a buck or less—but prices are rarely much higher. Typically drawing the cost-conscious, dollar stores are now seeing even wealthier customers shop for necessities to stretch their budgets. Another trend—perhaps a more worrying one—is that people are increasingly shopping more with credit than cash.
Dollar Tree posted strong earnings this past quarter, and come Thursday (Dec. 1), Dollar General, another chain, is poised to do the same. Of course, dollar stores aren’t entirely immune to economic headwinds—Dollar Tree trimmed its guidance for the year—but they are resilient.
The greatest asset for these stores, which stock wide varieties of items at low prices under one roof, is that they’re ubiquitous—and that, unlike Amazon Prime, they don’t come with a $139 annual price tag for deliveries that still take a day.
Dollar stores, by the digits
18,000: The number of Dollar General stores across the US
7,882: The number of Dollar Tree stores across the US
9.3%: The year-on-year rise in Dollar Tree’s food and beverage, snacks and cookies, and candy sales. Its overall same-store sales increased 8.6%
4.7%: The year-on-year growth in same-store sales of food and beverages for Family Dollar, outpacing the chain’s overall same-store sales growth of 4.1%. (Dollar Tree acquired Family Dollar in 2015.)
$1.25: The new price, as of last year, of average Dollar Tree items, after sticking to $1 for 35 years. The hike, which was intended to offset high costs and improve the quality of its merchandise, didn’t hurt demand
$80,000: The minimum household income of a majority of Dollar Tree’s new customers.
$40: How much a Motley Fool writer was able to save on Halloween expenses by shopping at dollar stores.
$9.43 billion: The estimate, from Zacks Consensus, for Dollar General’s revenues this past quarter, a spike of 10.7% from last year. Its “better pricing, private-label offerings and effective inventory management are likely to have contributed to the to-be-reported quarter’s top line,” Zacks noted. “The company’s operational capabilities, coupled with its real estate growth strategy, position it well to gain market share by targeting low-to-middle-income-group consumers. It has also been focusing on consumable and non-consumable categories to boost traffic.”
9,000: The number of Dollar General stores started offering same-day delivery, typically within an hour, by partnering with DoorDash a year ago
Quotable: Dollar stores are more convenience stores than discount stores
“Well, back in the 2008-2009 downturn, we saw a similar effect where when people are kind of stretched, feeling a little pressed, they’ll trade down, if you will, and go to the dollar store. That’s part of it. The other thing is we’ve seen a lot of growth in both of these chains, particularly Dollar General, where they’ve really become the convenience store in rural America, right? So in—near my house in New Hampshire, there are 4 Dollar Generals, for example, within a 10-mile radius, right? So they’re also a convenience store. And when people know, I can go there to pick up some milk, or maybe I need some dish detergent or some laundry detergent—and I know it’s going to be a low price. So it’s something that we’ve seen in previous downturns.”
The staffing problems plaguing dollar stores
Last August, a Family Dollar store in Nebraska temporarily shut after all its workers quit over low pay and long hours. These stores are so strapped for labor that, earlier this month, a viral TikTok video showed a manager trying to hire on the spot from a long line of customers.
Safety often takes a backseat in these short-staffed outlets. Last week, two Washington Dollar stores were slapped with $55,000 in combined fines for blocked electrical panels and stacked boxes that were “perilously close to collapsing.” The stores have violated these safety standards time and again.
The understaffing and undercharging is feeding another phenomenon that ironically goes against affordability. Auditors found that overcharging was rampant at Ohio dollar stores.
One big number that shows Amazon’s behemoth status
$58.8 billion: The revenue generated by Amazon each hour, versus $58.6 million generated each hour by Macy’s, Best Buy, Target, Costco, The Gap, Target, Kohl’s, Nordstrom, Foot Locker, Ross Stores, Big Lots, Dollar Tree, Urban Outfitters, and Bed Bath & Beyond combined
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