December 7, 2024

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Dollar stores are fighting over 1 dollar

Dollar stores are fighting over 1 dollar

last year, dollar tree (DLTR) announced that it was Stay away from $1 prices He raised the prices of most products to $1.25. With Dollar Tree dropping the $1 price tag, its main competitor general dollar (DJ) He sees an opportunity to attract some clients.
Dollar General advertises their $1 prices to customers in stores to push the perception that it’s the right place to save money Everything becomes more expensive. Dollar General is “trying to take Dollar Tree shoppers” and position itself as a trading option, said Michael Montani, an analyst at Evercore ISI.

With most of its stores in rural areas, Dollar General targets low-income customers and sells food and household necessities. By contrast, Dollar Tree, a smaller competitor, operates primarily suburban stores aimed at middle-income customers looking for party goods and other craft items.

The largest dollar store chains in the United States are not true dollar stores. Dollar General, for example, hasn’t sold everything for $1 in decades, and only about 20% of its merchandise is worth $1 or less.

But more recently, Dollar General has been placing more $1 items at prime store locations and adding tags highlighting those prices. The company said this week that it is also considering increasing the variety of items priced at $1.

“We’re really headed for the one dollar price point,” CEO Todd Vasos said on a call with analysts Thursday. Dollar General ‘really pays for it [$1] Part of the business because I think our customers are going to need us more there. “

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Vasos said that Dollar General’s major customers, many of whom have fixed incomes, often run out of money at the end of the month. Offer $1 merchandise “bridges that last her a few days” and help her “complete her month.”

its gas prices More than 4 dollarsDollar General expects customers to drive fewer cars and shop closer to home. With 18,000 US stores, including some in towns where it’s the only one around, Dollar General believes these trends are working in its favor and shoppers will bypass and trade higher-priced stores, especially for $1 products.

“Difficult times for the consumer usually mean they need us more,” Vasos said.

As Dollar General ramped up its $1.25 strategy, the Dollar Tree moved away from it — even though the $1 prices had been Dollar Tree’s business identity for 35 years and its decision to move to $1.25 alienated customers.

But the highest rate of inflation in 40 years forced the Dollar Tree to make changes. It raised prices because its business was under pressure by having to keep everything under $1, with rising costs of labor, transportation, fuel, merchandise and freight slashing the company’s profits.

The jury is still out on the impact of the change. Earlier this month, Dollar Tree said prices of $1.25 are helping drive sales, but it also indicated that shoppers are buying fewer items as a result. Some Dollar Tree loyalists also protested the price hike.