Retail
Written by Mary Hanbury
Updated
2018-09-19T13:40:00Z
- Dollar Tree and Dollar Generalare the largest dollar stores in the United States and are neck-and-neck in terms of store count and annual sales.Based on numbers alone, the two chains are almost identical. However, thereare some big differences in the shopping experiences you'll have at these stores.
- In August, the two companiesreported second-quarter results. Same-store sales at Dollar General were up 3.7%, while Dollar Tree reported a more modest 1.8% growth because of weaker sales at its Family Dollar stores.
- We put the two stores to the test.
Advertisem*nt
Bargain-hunting has been the flavor of the past decade.
Since the recession, cost-conscious consumers have flocked to off-price, thrift, and dollar stores in search of good deals. As a result, these stores have seen a surge in sales.
From 2010 to 2015, US dollar-store sales grew to $45.3 billion from $30.4 billion, and hundreds of stores have opened. The credit-rating agency Moody's said it expects this market to grow 8% in 2018.That's about double the growth of 3.5% to 4.5% it expects for US retail in general during the same time.
Dollar General and Dollar Tree are the two largest dollar stores in the United States and based on numbers alone, the two chains are almost identical.
Advertisem*nt
Dollar Tree – and its newly acquiredFamily Dollar chain – have slightly more locations than Dollar General, but both have about 14,000 to 15,000. In terms of sales, Dollar Tree is a close second, generating $22 billion in sales in 2017 compared with $23.5 billion at Dollar General.
But there is a massive difference in the shopping experience at these no-frills stores. First and foremost, Dollar Tree sells only products that are $1 or under, whereas Dollar General, which once did the same, is now more like a discount retailer.
In recent quarters, Dollar General has outpaced its main rival in terms of sales growth. In the most recent quarterly results, reported in August, same-store sales were up 3.7% at Dollar General and 1.8% at Dollar Tree, because of weaker sales at its Family Dollar stores.
We visited both Dollar General and Dollar Tree in March to see how they compared:
Advertisem*nt
We visited Dollar General and Dollar Tree stores that were a 15-minute walk from each other in Brooklyn, New York.
Advertisem*nt
Our first stop was at Dollar General. The chain has 14,761 stores in the US, most of which are located in rural areas.
Dollar General was initially rolled out to areas that were not already served by a Walmart. As these stores are generally in rural markets, they cost less to operate.
Walmart launched a series of mini express stores in 2014 with the aim of winning back the midweek shopper from Dollar General. The strategy was not successful, and Walmart ended up closingthese stores and selling 41 of the locations to Dollar General.
Source: Dollar General and Business Insider
Advertisem*nt
On first impression, the store looked great. It was modern and bright.
Advertisem*nt
While Dollar General isn't strictly a dollar store, prices are generally 20% to 40% lower than at traditional grocery and drug stores, according to a report by the credit-rating company Moody's.
The company's target shopper comes from a household making $40,000 or less a year.
"The economy is continuing to create more of our core customer," Dollar General CEO Todd Vasos told The Wall Street Journal in December.
When the economy bites, the company flourishes.
"We are putting stores today [in areas] that perhaps five years ago were just on the cusp of probably not being our demographic, and it has now turned to being our demographic," Vasos said.
At the front of the store was a large selection of snacks, drinks, and candy.
Next to this was a small "fresh produce" section. The company has been adding groceries and fresh produce with the goal of driving traffic. By offering a bigger selection, it can better compete with Walmart.
Vasos said Dollar General would roll out fresh produce to 100 more stores and said same-store sales numbers were three times as high in stores that stocked fresh produce as in those that didn't.
Advertisem*nt
This store didn't have fresh fruits or vegetables, but you could pick up basics such as milk and eggs. There definitely wasn't enough here to do your weekly grocery shopping, but it could be enough to grab some essentials midweek.
While there were a ton of deals on well-known products ...
Advertisem*nt
... you also had the option to pick up lower-cost, private-label items.
On average, the company's stores are 7,300 square feet in size. Considering this is less than one-tenth the size of the average Walmart store, we were impressed by the variety of products on offer.
Source: Dollar General
Advertisem*nt
Dollar General is known for its affordable, basic products.
The more-expensive items were placed behind a plastic barrier. When you lift the plastic, a beeping noise sounds.
Advertisem*nt
Some products were packaged in smaller quantities to keep prices down.
Instead of selling items in bulk, dollar stores sell small quantities of items to keep the cost of each transaction low. But this ultimately means the customer willpaymoreon a per-ounce or per-item basis in the long run.
The chain started in 1955 as a true dollar store where everything cost $1. Today, you can still find some $1 deals.
Advertisem*nt
There were lots of women's and men's beauty and grooming products.
We spotted some well-known brands, such as Maybelline, at big discounts.
Advertisem*nt
There was a small clothing section in this store, but most of the space was taken up by housewares and kitchenware. You could even pick up a $14 barbecue.
At the cashier, you could buy magazines, gift cards, and cigarettes. This location didnot sell alcohol. Overall, the store was a good size, easy to navigate, and a convenient way to shop for essentials.
Advertisem*nt
Dollar Tree instantly set a different tone.
These stores are predominantly located in suburban areas.
The store had a bare-bones design and looked tired and run-down. But it stayed true to its name, and everything cost $1.
Advertisem*nt
The chain's seasonal merchandise accounts for 49% of its revenue, according to Moody's. Almost a quarter of this store was taken up by seasonal items — there were a lot of Easter toys, chocolates, and St. Patrick's Day decorations.
The store changes its assortment constantly, which gives its shoppers a treasure-hunt kind of experience. For this reason, e-commerce retailers such as Amazon are less of a threat to the store.
"Dollar stores have not sought online penetration for the simple reason that they don't have to," according to Moody's.
Despite this, both Dollar Tree and Dollar General have an online platform.
Three rows were devoted to greeting cards.
Advertisem*nt
The store is definitely less slick than Dollar General.
There were lots of unpacked boxes and abandoned crates. In one corner, we spotted a stray traffic cone.
Advertisem*nt
Dollar Tree stores measure 8,000 to 12,000 square feet, which makes them much larger than Dollar General locations. The shelves, however, were empty in some parts of the store we visited.
Though everything here is $1, some of the brands were less well-known.
Advertisem*nt
The grocery section of the store was larger than Dollar General's. But there was no fresh produce.
Dollar Tree has also increased the number of food and drink items it sells, as these drive traffic into stores.
There were lots of nonperishable products such as chips, pasta, dried herbs, and oatmeal.
Advertisem*nt
The frozen-food section was also much larger here. You could even pick up a steak for $1.
We spotted some more premium products dotted around the store ...
Advertisem*nt
... including Betty Crocker baking kits and Hershey's ice cream.
The remaining part of the store was stocked with beauty products, children's toys, and accessories.
Advertisem*nt
The kitchenware section was impressive. These glasses were a steal at $1, and there were lots of cheap crockery and cooking utensils.
There are definitely a lot of bargains to be had at Dollar Tree, but it didn't feel like the place you could do a weekly shop. Many of the shelves were bare, which felt depressing.
Advertisem*nt
All in all, it was a bit of a mess.
The verdict: Dollar General was leaps and bounds ahead of Dollar Tree in terms of the shopping experience and quality of products. It felt as if Dollar Tree were relying on the fact that its low prices would always draw customers in, and while this may be true, Dollar General definitely seemed like a bigger threat to stores like Walmart. Dollar General is somewhere between a dollar store and a traditional store, which means it is positioned to win over more customers.
Senior Retail Reporter, Business Insider
Mary is a senior retail reporter at Business Insider. Contact her at mhanbury@businessinsider.com.
Read next
NEW LOOK
Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily. Read preview
Thanks for signing up!
Access your favorite topics in a personalized feed while you're on the go.
Advertisem*nt
