With most of its stores in rural areas, Dollar General targets low-income customers and sells food and household essentials. By contrast Dollar Tree, a smaller competitor, operates stores primarily in the suburbs that target middle-income customers hunting for party goods and other knickknacks.
The largest dollar store chains in the United States aren’t true dollar stores, though. Dollar General, for example, hasn’t sold everything for a dollar in decades, and only about 20% of its merchandise is $1 or less.
But recently, Dollar General has been putting more of its $1 items in prime positions in stores and adding signs highlighting those prices. It’s also considering growing its assortment of $1 items, the company said this week.
“We’ve actually leaned into our $1 price point,” CEO Todd Vasos said on a call with analysts Thursday. Dollar General is “really pushing that [$1] side of the business because I think our customers will need us even more there.”
Dollar General’s main customers, many of whom have fixed incomes, often run out of money at the end of the month, Vasos said. Offering $1 items “bridges that last few days for her” and help “round out her month.”
“Tougher times for the consumer normally means that she needs us more,” Vasos said.
As Dollar General has stepped up its $1 strategy, Dollar Tree has moved away from them — even though $1 prices were Dollar Tree’s brand identity for 35 years and its decision to move to $1.25 risked driving away customers.
But the highest inflation in 40 years forced Dollar Tree to make changes. It raised prices because its business was pressured by having to keep everything under $1, with surges in labor, transportation, fuel, merchandise and shipping costs squeezing the company’s profits.
The jury is still out on the impact of the change. Earlier this month, Dollar Tree said that $1.25 prices were helping grow sales, but also noted that shoppers were buying fewer items as a result. Some Dollar Tree loyalists have also protested the price hikes.