Death of the dollar store: 2024 may be their swan song

For years, dollar stores were a fixture in nearly every strip mall in California, offering cheap household goods, bread and produce, and even toys and gifts.

But if it seems like your favorite dollar store is heading for the exit, you’re not wrong.

2024 may be their swan song.

In April, California-based 99 Cents Only announced it was closing all 371 locations after decades in business. The retailer blamed economic factors, including rising levels of “shrink,” inflation, and shifting consumer demand that has presented “significant and lasting challenges.”  

If you’ve lived in Southern California for a while, you’ll remember when the dollar store truly was 99 cents per item or less. Over time, they became MOSTLY 99 cents or less, but some items cost more.

Today, so-called dollar stores have items well over a dollar and even more than $5.

Dollar Tree, which owns Family Dollar, recently said it will close nearly 1,000 stores.  That’s after Dollar Tree raised prices in the past couple of years for the first time in decades.

Others, like Dollar General, say they continue to grow, even if it’s been a rocky road. Dollar General recently opened its 20,000th store and plans to open even more this year.  

Its CEO once said, “We do very good in good times, and we do fabulous in bad times.”

If you want an eye-opening look at the dollar store business, watch John Oliver’s report.

The trouble many dollar stores are seeing started long ago.

Bigger retailers offering discounted prices have already felt the sting. JC Penney, Sears, and others (the stores we grew up with) are vanishing fast. 

More regional outlets like Building 19 which dotted the landscape across New England and boasted “good stuff cheap” with sarcastic cartoons and the promise of coffee as “old and weak as you are” went bankrupt years ago.

The Sun recently called it all a “retail apocalypse.”

KTLA consumer reporter David Lazarus offered this take:

“Discount stores are reflective of a different time – and a different economy,” he says. “They have their roots in moving unsold inventory from other retailers. Once a 99 Cents Only store starts selling stuff for a few bucks, its competitive advantage has started to disappear.”

So, if dollar stores and discount chains are dying – or at the very least in a business model crisis – what is going to fill the void?

Well, you may not have to look any further than the big bullseye. Retailers like Target and Walmart are slashing prices to lure those discount-conscious customers.

Target recently announced price cuts on some 1,500 “frequently shopped items,” including meat, milk, bread, fresh fruit, pet food and soda, and non-perishable products such as paper towels and diapers. You better bet they’re looking at all the discount stores and seeing an avenue to recruit new customers.

Others, like Five Below have set the dollar limit a little higher: most everything is priced between one dollar and five dollars (as the name implies). They are targeting what they call “trend-right, high-quality products loved by tweens, teens, and beyond.” 

Five Below now has over 1,500 stores in 43 states.

In the meantime, price-conscious shoppers are seizing deals on top of deals as discount stores host “going out of business” sales – at least that’s how they’re billed.

As to whether we’ll ever see a return to the dollar store heyday, Lazarus says, maybe.

“Expensive leases and labor costs only add to the challenges. As inflation – and prices – start to come down, this could change. For the moment, it’s a rough time to be a bargain merchant.”