Dollar Discount Stores: Benefit or Hindrance to Local Economies? Analysis and Closure of 99 Cents Only Stores and Family Dollar Locations

Why Dollar Stores are Facing Closures and the Future of the Industry

Background

The retail industry has recently seen a wave of dollar discount stores facing closures, with the news of 99 Cents Only Stores shutting down its 371 locations along with the closing of nearly 600 Family Dollar stores. While this may suggest a setback for the dollar store format, experts believe that it does not spell the end for these stores and argue that they will continue to thrive in the retail market.

Challenges Faced

The Dollar store format, which has witnessed tremendous growth in the last decade, has encountered multiple challenges. Inflation, reduced government benefits for the Supplemental Nutrition Assistance Program (SNAP), and inventory losses have negatively impacted dollar stores. Dollar Tree CEO Rick Dreiling specifically highlighted the challenging macro environment faced by the industry.

Additional Complications

In addition to economic challenges, certain dollar stores have faced mismanagement and violations. Dollar Tree and Family Dollar, for instance, were cited repeatedly by the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) for various violations. In particular, Family Dollar encountered an issue regarding the storage of products in a rat-infested warehouse in Arkansas, for which the company has agreed to pay a hefty penalty.

The Future of Dollar Stores

Despite these closures, experts argue that the dollar store format will continue to flourish. Dollar General, for instance, has been growing consistently with plans for the opening of 800 new stores this year and adopting a strategy of targeting rural locations. Dollar General’s emphasis on rural communities, less competition, and lower real estate expenses are factors that have contributed to its success.

While 99 Cents Only Stores may have struggled due to its smaller scale of operations and weaker economies of scale, this does not indicate that the format as a whole is fading away. Experts predict that dollar stores will expand and persist in the future, as they continue to offer affordable essentials to low-income areas.

Resistance and Pushback

Although dollar stores have their proponents who emphasize their role in providing affordable goods to low-income communities, there has been resistance against their expansion. Many cities and towns have taken measures to block the opening of new dollar stores and have implemented laws to limit their growth. Critics argue that dollar stores limit access to healthy food options, a claim that dollar store representatives have refuted.

As communities have the opportunity to take back sales dollars from closed dollar stores, there is a chance to provide healthier food options and establish more sustainable solutions.