It has been a rough period for discounters that use the dollar-store model.
Supply-chain issues and rising costs have led many companies that use the dollar price point to abandon that model. Instead of the gimmick of every item costing a dollar — a price point that was always very limiting — many chains have pivoted to a value-based model.
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Even using a broader range of price points, these chains face heavy competition from massive retailers including Walmart and Target. Both those chains have embraced discounts and value, responding to budget-stressed consumers.
In many ways the retail space has mirrored fast food, where consumers have pushed brands to offer $5 value meals. Those bundles are low-margin for the restaurant chains offering them, but they drive foot traffic, and some customers buy more than just the $5 value meal.
The current economy, while healthy, still suffers from inflation driving prices higher and consumers' perception of prices leaving them thinking they have increased much more than they have. It's a challenging situation that has forced thousands of retailers to close and some to shut down entirely.
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Popular discount chain shut down abruptly
One of those chains, 99 Cents Only, was a surprising casualty given the company's long history and deep community ties.
"Founded in 1982, 99 Cents Only Stores LLC currently operates nearly 371 stores located in California, Texas, Arizona and Nevada. 99 Cents Only Stores LLC offers a broad assortment of name brand and other attractively priced merchandise and compelling seasonal product offerings," the chain posted on its website.
That history hit a brick wall on April 4 when 99 Cents Only Stores said it would be closing all its stores.
"The company has entered into an agreement with Hilco Global to, among other things, liquidate all merchandise owned by the company and dispose of certain fixtures, furnishings, and equipment at the company's stores," according to the posting. "Sales under this agreement are expected to begin April 5, 2024, and will be carried out at all 371 of the company's store locations."
99 Cents Only started with that gimmick, but in recent years it has used a variety of price points. In many markets, it offered fresh food in communities where that was hard to come by.
"The 99 Cents Only Stores serve communities with fresh produce and a wide assortment of quality products, from everyday household items to fresh produce to an exciting assortment of seasonal and party merchandise, including decorations, costumes, and gifts," the company posted.
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99 Cents Only locations are reopening
While the 99 Cents Only brand is unlikely to return in any meaningful way, about half its leases were purchased by Dollar Tree (DLTR) . That chain has rapidly reopened about half the 171 locations it took over and more are coming quickly.
"We're also happy to announce that as of today, we've reopened approximately 85 former 99 Cents Only locations as Dollar Trees. In fact, another 20 stores are reopening tomorrow and the remaining 56 should reopen by the end of the year," Dollar Tree Chief Operating Officer Mike Creedon said during the chain's second-quarter earnings call.
The COO was proud of how quickly the chain made the transition.
"Getting this done from scratch in less than 100 days required a massive effort across multiple teams. That's a real accomplishment. I would like to thank everyone involved for all their hard work," he added.
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The converted stores should benefit from being able to serve the needs of the former 99 Cents Only locations.
"These 99 Cents Only locations are proven, high-quality stores in strong markets with great growth potential," Creedon said. "We're very excited about expanding our footprint across California and the Southwest and we couldn't be more pleased with the reception we've received from the communities who've welcomed us."
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