In an era of inflation, why are dollar stores struggling?

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Some consumers say it could be declining quality

Inflation has increased the cost of everything over the last three years and that suggests dollar stores should be enjoying a booming business. But that doesn’t appear to be the case.

Dollar Tree, the parent company of Family Dollar, recently announced it is closing 970 unprofitable stores. In mid-March, Dollar General reported that in its fiscal fourth quarter, net sales decreased 3.4% to $9.9 billion. The fourth quarter operating profit plunged 37.9% to $579.7 million.

What gives? Why aren’t inflation-weary shoppers flocking to dollar stores to make their money go further? Analysts say a lot has to do with the products these stores sell.

Most now sell food products that offer the retailers low margins. Still, everyone needs to buy food. But it’s the other items that low-income consumers are passing up as they try to make ends meet. 

Many consumers are passing up things like balloons, greeting cards and craft supplies because they need money for the essentials. So inflation hurts dollar stores two ways – it raises the cost of their inventory while discouraging their customer base.

If dollar stores try to recover by cutting back on staff it can just make matters worse. In reviews posted at ConsumerAffairs, dollar store customers have noticed a change.

Declining quality

Ree, of Brookston, Tex., says she’s noticed the quality of food at her neighborhood Dollar General isn’t what it used to be.

“I bought ground meat and other frozen items from there that were old and I got sick,” Ree told us. “The cereal was stale.”

Kelly, of Georgetown, S.C., reports a disappointing experience at her neighborhood Dollar Tree store.

“I swear the health department needs to shut them down,” Kelly wrote in a ConsumerAffairs review. “I love that store, but seeing boxes laying in the aisles, dirty floors, empty dairy case with nasty food, is a danger to public health. One clerk was just hanging out , looking at her cell phone. Wouldn't check me out. Clerks often talk about other employees or customers or their personal problems while working. I could go on. Please fix it. We need this store.”

That’s just it. Dollar stores are usually found in rural and low-income neighborhoods where there are fewer options. When these stores close or service declines, consumers pay the price.

A report by TrulyNet says many of Family Dollar’s problems are caused by staffing shortages and poor store management, which customers notice.

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