Dollar and General Merchandise Stores
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 8,057 dollar and discount stores in the US sell a wide variety of merchandise at low, fixed price points, often in dollar increments. Merchandise includes everyday necessities and impulse items. By offering a limited number of items per merchandise category, firms maintain purchasing power and keep costs and prices low.
Low Prices Limit Flexibility
The value proposition of a dollar store is based on low, fixed retail price points (“Everything’s $1!”), which limit a company’s flexibility when costs rise.
Inventory Shrinkage and Theft
The operating model for dollar stores, which is based on small stores, crowded shelves overflowing with merchandise, a high number of cash transactions, and minimal staffing, makes operators vulnerable to inventory shrinkage and crime.
Industry size & Structure
The average dollar and discount store company operates out of a single location, employs about 67 workers, and generates about $9 million annually.
- The dollar and discount store industry consists of about 8,060 firms that operate over 45,000 establishments, employ 540,000 workers and generate about $75 billion annually.
- The industry is highly concentrated; the top 50 companies account for over 90% of industry revenue.
- Large firms include Dollar Tree (Family Dollar), Dollar General, and Five Below.
Industry Forecast
Dollar and General Merchandise Stores Industry Growth
Recent Developments
Jul 18, 2024 - Inflation Up, Employment Falls
- Producer inflation for other general merchandise retailers, including dollar stores, increased during the first five months of 2024, according to producer price data released by the US Bureau of Labor Statistics (BLS). Employment by all other general merchandise retailers fell in the first five months of the year, while average wages for nonsupervisory employees in the industry grew during the period. Average wages per hour reached $17.77 in May 2024, per the BLS.
- Dollar General plans a net reduction of up to 1,000 SKUs at its stores in 2024, as part of a larger plan to streamline its supply chain and decrease shoplifting, according to a report in the Wall Street Journal. Dollar General is one of many retailers and manufacturers shrinking the number of product choices available to consumers, in a strategy to raise profit margins and use insights gathered during COVID-era supply bottlenecks. Companies are also hoping the approach will appeal to shoppers who have been more discriminating in an inflation-pressured economy. According to Candice Medeiros, an insight strategist at trend forecasting firm WGSN interviewed in the report, “More and more retailers are realizing that today’s consumer no longer wants an endless aisle—they want the right aisle.”
- A new UBS report in Retail Dive forecasts that 45,000 retail stores may close in upcoming years as online sales gain share. Online retail penetration is expected to rise to 26% from 21%, with retail sales growth of 4% by 2028, as the industry focuses more on fulfillment and distribution centers. If the closures occur, USB said the total number of stores in the US will fall from 958,533 to 913,500. Other factors driving store closures include a tighter lending environment, higher operational costs, and consumers spending more on services than goods. The report stated that sporting goods, clothing, consumer electronics, home furnishings, hobby, book, and music stores have closed the most locations since the first quarter of 2019. Still, retailers can incorporate existing stores as an important piece of their omnichannel capabilities. Per the report, “Our analysis assumes that stores remain an important part of the overall retail ecosystem for retailers and consumers. In the simplest terms, stores serve as hubs of fulfillment and support distribution logistics. This is increasingly more important as consumers are becoming more demanding for convenience or immediate deliveries.”
- According to a new ConsumerWise report from McKinsey, consumers continue to “trade down,” changing the type or quantity of purchases for better pricing and value, in Q1 2024. About 76% of respondents reported engaging in trade-down actions in Q1 2024, compared to 77% in Q4 2023. Younger consumers tended to trade down more often than older consumers, while low and middle-income consumers traded down more frequently than high-income consumers, per the report. The report also shows that the percentage of consumers using the “buy now, pay later” option has remained mostly the same in Q1 compared to the previous quarter. Additionally, fewer consumers are delaying their purchases, with only 30% doing so in Q1 compared to 35% in Q4.
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