Dollar General Is Luring Shoppers From Dollar Tree With These Major Changes
The company is trying to win the war over dollar store customers.
You've got two major options when it comes to dollar stores: Dollar General and Dollar Tree. (There's also Family Dollar, which the latter has owned since a merger in 2015.) These retailers have been competing for customers for years, but the competition is getting fiercer now that Dollar Tree has moved away from its traditional $1 pricing structure to higher prices more in line with Dollar General's typical price point. But Dollar General isn't letting a rival move into its space without making some changes of its own. Read on to find out what changes Dollar General is making to lure shoppers from Dollar Tree.
Dollar Tree angered shoppers by raising prices in 2021.
Last year, Dollar Tree made a decision that quickly caused backlash from even its most loyal customers. The company announced in Nov. 2021 that it would be raising the prices of a majority of its products to $1.25 by the first quarter of 2022 after testing higher prices at some stores. "For 35 years, Dollar Tree has managed through inflationary periods to maintain the everything-for-one-dollar philosophy that distinguished Dollar Tree and made it one of the most successful retail concepts for three decades," the discount chain said in its announcement.
"However … the company believes this is the appropriate time to shift away from the constraints of the $1.00 price point," Dollar Tree coninuted. But despite the company saying it had received positive customer feedback at the stores it tested higher prices in, the decision did not sit well with all shoppers. Some customers even said that they were "sick to [their] stomach" over the price change, CNN reported.
Now Dollar General is working to highlight more of its $1 offerings.
Dollar General, on the other hand, has always had a wide range of prices for shoppers, with some products far surpassing $1. But in light of Dollar Tree upsetting many of its customers, Dollar General is now working to try to attract those shoppers. The latter is advertising its $1 prices to shoppers in an effort to try to "take Dollar Tree shoppers" and position itself as the lower cost option, Michael Montani, an analyst for investment bank company Evercore, told ABC-affiliate KAKE in Wichita, Kansas.
According to the news outlet, Dollar General has been making changes in its stores to put more of its $1 products in prime positions throughout the area. The company is also adding more signs to highlight that low price.
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Dollar General might also increase the number of $1 products it sells.
Dollar General executives have talked candidly about these changes. "We've actually leaned into our $1 price point," CEO Todd Vasos confirmed on a call with analysts March 13, per KAKE. The company is "really pushing that [$1] side of the business because I think our customers will need us even more there," he added.
According to KAKE, Dollar General said it is also considering increasing its assortment of $1 products. Vasos said offering $1 items can help its main customer base—many of whom have fixed incomes and tend to run out of money at the end of the month. Its lower priced products will help "round out [a customer's] month," he said.
Dollar General said it's hoping certain trends will convince more shoppers to stop at its stores.
Vasos didn't speak to the company's rivalry with Dollar Tree, but he did note that Dollar General is hoping it can pull in more customers with these changes—especially as shoppers are struggling even more right now due to higher gas prices and inflation. "Tougher times for the consumer normally means that she needs us more," Vasos said.
According to KAKE, Dollar General has 18,000 U.S. stores, including some in areas where it's the only store around. The company said that this is likely to work in its favor amid rising gas prices. Dollar General believes customers will drive less and shop closer to home, resulting in bypassing higher-priced stores and trading down to shop at its locations, especially with more $1 products available.