The dollar market has spread rapidly in the US since the Great Recession, attracting cash-strapped consumers and their twists in the 21st century on Woolworth’s “Seventh” model that became popular 100 years ago.
The Dollar General now sells approximately 17,800 stores and the Dollar Tree has more than 15,900 stores, compared to the US Walmart 4,740 retail store.
Nearly 2,000 new stores are expected to open this year, according to Coresight Research. This represents about half of the U.S. retailer plans that are planning and selling what is happening in the Amazon-dominated segment, Covid-19 and clearing retail space.
This growth has boosted the Dollar General and Dollar Tree stock market, the largest chain, to $ 75bn.
But it has come in handy for the cheap season, which makes it easier to make 30% plus the limit of the items that sell for $ 1.
This has changed abruptly, with customer prices jumping from one major year to 13 years in July as all retailers struggle with barriers and staff shortages.
Rising prices are causing problems in stores that charge $ 1 for their products. “It’s really difficult if you have to be a two-dollar store,” said John Strong, a professor at the College of William & Mary’s business school.
Announcing their findings last week, the Dollar General and the Dollar Tree criticized the rise in shipping costs and payroll costs along the way. Payments to both companies have frustrated investors.
Dollar General, which sells multiple items under $ 5, has raised prices in response. But Todd Vasos, chief executive, admitted that their customers “could not afford more.”
This has raised questions about whether dollars can continue to get cheap goods, and partners, to achieve their destructive goals.
Prices for transportation, says the Dollar General, have become a “growing trend”. Dollar Tree predicted the magnitude of the problem by saying its carrying prices would be $ 185m to $ 200m more than expected in May.
Selling a number of stores where there is a crisis in the industry is difficult, says Mark Cohen, a professor at Columbia Business School and a former principal of Sears Canada, but doing so by adding hundreds of items is even more difficult.
The opening of these stores also requires the acquisition of thousands of financial services workers where workers are in need as well pay expectations are rising. The Dollar General alone will recruit another 50,000 people between July and September.
Critics like Walmart have increased their salaries, and UBS analysts last October found that the Dollar General paid the lowest price per hour for the 25 retailers it studied, about $ 9.68. With Amazon stocks now offering $ 15 per hour, double the minimum federal fees, dollar stores can compete.
Michael Witynski, chief executive of the Dollar Tree, says the decline in employment has led the company to offer $ 1,000 in bonuses in distribution centers and higher wages in some markets. In May, the company estimated that raising the minimum wage for state and local government could cost $ 50m this year.
Improving child labor, which has been set up to alleviate the financial crisis, has helped address the crisis, Cohen said, but it will end in September.
John Garratt, chief financial officer at Dollar General, has noted that his company has already received a lot of publicity after saying that some regions can quickly repay their profits.
The prospect of more parents returning to work when schools reopen could also provide relief, says researcher Gordon Haskett, researcher Gordon Haskett.
The dollar store is still at risk if its rivals raise pay expectations, Strong said, but it’s “light of work” compared to other chains, which only require 15 to 20 employees at the store. “They will definitely be affected by Walmart’s raise but it will not go beyond what it can sell to other retailers,” he said.
The chains have some reason to believe they can continue to breathe a sigh of relief, from the very beginning of their business to their history of transformation to reduce costs.
For a long time they have been “guys who go where Walmart can’t go”, says Strong, pointing out that they targeted markets that were too small to be sold.
With three-quarters of the U.S. population within five miles of the Dollar General, such stores may be able to participate in the market in supermarkets and “women’s and pop” stores unrelated to Walmart’s full bag, “Cohen said. .
The dollar’s performance reflects “economic growth”, says Ken Fenyo, President of Coresight Research and Technology. Last year’s plague epidemic brought a wide range of budget-conscious consumers, and this year’s rise in prices of goods has brought many new customers.
Ordinary retailers who once saw a store near the dollar as a “last resort” have found it “much better than this”, said Strong, noting how chains have changed stores and increased their stocks.
In doing so, they have become experts in strong trading with retailers because, as Witynski of the Dollar Tree told experts, “cents are important when you sell dollar items”.
Needless to say, “if we had a price hike we wouldn’t believe we were going through [consumers], we leave [item] I’m going for another, ”said Vasoli of Dollar General.
Chains have now become a popular way to change the size of the package, Strong said, so “where you have six toilets, you now have four”.
The dollar market is also evolving by adding more recent harvests, experimenting with new varieties and increasing advertising. Dollar General has opened 16 Popshelf outlets, offering home decor and home furnishings sponsored by middle-income consumers. Dollar Tree, similarly, has added Dollar Tree Plus shares to hundreds of stores, stocking items that cost more than $ 1.
With the same store sales declining year on year at the end, both chains face questions about their size depending on the opening of new stores, Cohen says, but rising prices alone should not make them less competitive.
“I don’t know if he can open 1,000 stores a year but people said years ago he lost his temper and it didn’t happen.”