Walmart is taking dollar stores’ customers

Dollar stores in the U.S. are facing significant challenges as their low- and middle-income customer base struggles with rising costs and economic pressures. Dollar Tree's stock fell 20% after it revised its outlook, citing immense pressures on its customers. Many low-income households are sacrificing basic necessities due to inflation, with over 60% reporting difficulties in affording essential items. This has led to a decline in sales for both Dollar Tree and Dollar General, particularly in discretionary merchandise. Dollar General, which operates over 20,000 stores mainly in rural areas, has acknowledged that higher prices and a softer job market are impacting its customers. The company has shifted focus to discretionary items, but this strategy has backfired as these products remain unsold, forcing markdowns. Meanwhile, Dollar Tree is grappling with issues stemming from its acquisition of Family Dollar, which has resulted in the closure of over 900 stores. Competition from Walmart is intensifying the struggles of dollar stores. Dollar General's CEO noted that Walmart has effectively attracted customers seeking low prices, particularly as more affluent shoppers increase their spending at Walmart. The close proximity of Dollar General and Walmart locations means that when Walmart performs well, Dollar General tends to suffer. Overall, the combination of economic pressures, strategic missteps, and increased competition is leading to a downturn for dollar stores, which had previously thrived by catering to financially strapped consumers. The future of these retailers remains uncertain as they navigate these challenges.