Top Dollar Stores Are In A Price War With Each Other
Two dollar stores are going head to head in an all out price war desperately trying to nab customers from one another.
This article is more than 2 years old
The battle for your dollar has begun. Literally. When dollar store giant Dollar Tree decided last year to step away from its $1.00 price point and start charging customers $1.25, it didn’t go over well with their loyal customers. Dollar stores rival Dollar General saw it as an opportunity.
In an effort to steal some customers away from Dollar Tree and bring them into their dollar stores, Dollar General is beginning to lean heavily on their $1 prices in order to show customers that while the world around them is getting more expensive they, in fact, are not. It’s pretty clear, says Evercore ISI analyst, Michael Montani, that Dollar General is doing everything they can “to take Dollar Tree shoppers.”
The differences in these two dollar stores come down to location and product. Most Dollar General locations are in rural areas with their eye focused on low-income customers. The stores mainly sell food and household essentials. Dollar Tree, on the other hand, is usually found in the suburbs. Their clientele, so to speak, is middle-income customers who are on the lookout for knickknacks, party goods, or a little higher quality product.
While “dollar” is in their names, these dollar stores haven’t sold much product at that price for some time. It has been decades since Dollar General’s stores have carried and sold all their merchandise for a buck, and presently only about 20% of their products are listed for a dollar. With Dollar Tree’s recent change, they may not ever go back to a store that is strictly one dollar.
Although Dollar General has a small amount of merchandise selling for a dollar, they are making sure customers see they still offer that price point. Store owners have been strategic in placing these items in prime locations throughout Dollar General stores and they are adding nice, big, bright signs to help advertise that fact. The company is even thinking about offering even more one-dollar items to customers.
“We’ve actually leaned into our $1 price point,” CEO Todd Vasos told analysts on a recent call. He said, via CNN Business that his dollar store is “really pushing that [$1] side of the business because I think our customers will need us even more there.” Vasos was reflecting on the highest inflation the country has seen in over 40 years that including record gas prices.
Vasos also understands his customers, many of who are on a fixed income and many more who are low-income. He knows that the end of the month can be tough for millions of families, so Dollar General being able to offer more products for one dollar will hopefully help get them through.
As gas prices soar, Vasos sees customers driving less. He sees them shopping closer to their homes and with 18,000 stores across the United States, Vasos sees customers frequenting his stores more often. If they see that Dollar General offers that $1 price point, people will buy from them. “Tougher times for the consumer normally means that she needs us more,” Vasos said.
While dollar store giant Dollar General is beginning to embrace its title, Dollar Tree has been moving away from it. For 35 years Dollar Tree resisted the urge to bump prices up, but the pandemic and unrelenting inflation has caused the store to take drastic measures. Although a 25-cent rise in store prices may not seem like much, it can add up, especially for those who have to watch their pennies carefully.
So far Dollar Tree is unsure of the impact this price change has made. They see sales have grown, but they say they have also seen customers with fewer items when they reach checkout. They have also had to deal with a very unhappy customer base. Dollar General appears to be taking the right approach to the dollar stores wars, it’ll be interesting to see if Dollar Tree eventually counters.
