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 7,850 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 55 workers, and generates about $9 million annually.
- The dollar and discount store industry consists of about 7,850 firms that operate over 40,000 establishments, employ 430,000 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
May 16, 2023 - Sales Up for General Merchandise Stores
- Sales for general merchandise stores grew 4% unadjusted year over year and about 1% month over month seasonally adjusted in April 2023, according to data released by the National Retail Federation. Overall retail sales were up 1.6% in April 2023 over a year ago and 0.4% from March 2023, according to the US Census Bureau. NRF’s retail sales calculation, which excludes car dealers, gas stations, and restaurants, showed an increase of 2% unadjusted year over year and up 0.6% month over month in April 2023. According to NRF President and CEO Matthew Shay, “Retail sales rebounded in April, reflecting consumer resilience in the face of elevated economic uncertainty. Moderating price levels, continued labor market strength and wage gains have increased consumers’ ability to spend. However, they remain cautious and concerned about the current economic environment. Retailers continue to provide competitive pricing and convenience to help cost-sensitive consumers stretch their budgets.”
- Consumer confidence levels fell in April 2023 after a slight increase in March 2023, according to data from The Conference Board. The Conference Board’s consumer confidence index dipped to 101.3 in April 2023 from 104 in March 2023. According to Ataman Ozyildirim, a senior director of economics at The Conference Board, “Consumers became more pessimistic about the outlook for both business conditions and labor markets. Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months. They also expect fewer jobs to be available over the short term. April’s decline in consumer confidence reflects particular deterioration in expectations for consumers under 55 years of age and for households earning $50,000 and over.” Plans to purchase appliances, autos, homes, and vacations cooled in April 2023, a sign that consumers are pulling back amid reduced optimism, per Ozyildirim.
- Dollar General is expanding its beauty offerings by adding more than 1,000 products to 300 stores this fiscal year. The stores will have a new layout with an increased beauty footprint, internally branded as Beauty Reinvention. The company is expanding the skincare section by 50%, growing its soap and shower offerings by 30%, and offering a larger hair care and color section. Dollar General has launched three new exclusive skin and hair care product lines: Joy Works, Curl Rhythm, and yes! honey. According to Dollar General’s Amanda Wilson, “We have been purposeful in our expansion, balancing new, fresh and trendy items with value. Beauty Reinvention creates a beauty destination at DG.” Industry experts say beauty products can be a stable sales source even during challenging economic times. Consumers will use makeup as a “pick me up” while cutting back on more expensive categories.
- Foot traffic to dollar stores increased by 19% in January 2023 compared to January 2020, outpacing visits to grocery stores, superstores, and shopping centers, according to a new report by Placer.ai in Chain Store Age. Placer.ai found visits were up 66% at Five Below, 21% at Dollar Tree, and 19% at Family Dollar and Dollar General. Year-over-year visits in January 2023 were up 10% at Dollar Tree, 3.7% at Family Dollar, and 18% at Five Below, with a decrease of 3.1% at Dollar General. According to Placer.ai’s Bracha Arnold, “As people look for ways to save money on groceries, discount stores have become a popular choice, creating a challenge for traditional grocery stores. And since the large footprint of most dollar & discount stores puts most Americans within several miles of a store, the category’s strength is likely to continue in 2023.
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