After Chapter 11 bankruptcy closures, retail stores find new life
It has been a challenging time for discounters operating under the dollar-store model. Supply-chain disruptions and rising costs have compelled many companies to abandon the fixed dollar price point, a model that has proven increasingly limiting. In response, several chains are shifting towards a more flexible value-based pricing strategy.
Rising Competition from Major Retailers
Even with a broader range of price points, these discount chains face fierce competition from giants like Walmart and Target, both of which have embraced discounting and value offerings to cater to budget-conscious consumers. This trend mirrors the fast-food industry, where customers have pushed brands to offer $5 value meals. Although these bundles are low-margin for restaurants, they drive foot traffic and often lead to additional purchases beyond the advertised meal.
Despite a relatively healthy economy, inflation continues to impact prices, causing consumers to perceive costs as having risen more than they actually have. This challenging landscape has led to the closure of thousands of retailers, with some shutting down entirely.
The Abrupt Shutdown of 99 Cents Only
One notable casualty in this shifting environment is 99 Cents Only, a discount chain with deep community roots. Founded in 1982, the company operated nearly 371 stores across California, Texas, Arizona, and Nevada, offering a diverse selection of name-brand and attractively priced merchandise. However, the chain hit a significant hurdle on April 4 when it announced the closure of all its stores.
In an official statement, the company revealed, “The company has entered into an agreement with Hilco Global to, among other things, liquidate all merchandise owned by the company and dispose of certain fixtures, furnishings, and equipment at the company’s stores.” The liquidation sales were set to commence on April 5, 2024, across all locations.
99 Cents Only began with the gimmick of pricing everything at a dollar but had gradually introduced a variety of price points, even offering fresh food in areas where such options were scarce. “The 99 Cents Only Stores serve communities with fresh produce and a wide assortment of quality products, from everyday household items to fresh produce to an exciting assortment of seasonal and party merchandise, including decorations, costumes, and gifts,” the company stated.
Dollar Tree’s Acquisition and Reopening Plans
While the 99 Cents Only brand may not return in any substantial way, about half of its leases have been acquired by Dollar Tree (DLTR). The chain has quickly reopened approximately half of the 171 locations it took over. Dollar Tree’s Chief Operating Officer Mike Creedon announced during the second-quarter earnings call, “We’re also happy to announce that as of today, we’ve reopened approximately 85 former 99 Cents Only locations as Dollar Trees. In fact, another 20 stores are reopening tomorrow, and the remaining 56 should reopen by the end of the year.”
Creedon expressed pride in the rapid transition, highlighting the substantial effort required from various teams to accomplish the reopening in under 100 days. “Getting this done from scratch in less than 100 days required a massive effort across multiple teams. That’s a real accomplishment. I would like to thank everyone involved for all their hard work,” he added.
The converted Dollar Tree stores are expected to meet the needs of the communities previously served by 99 Cents Only. “These 99 Cents Only locations are proven, high-quality stores in strong markets with great growth potential,” Creedon noted. “We’re very excited about expanding our footprint across California and the Southwest, and we couldn’t be more pleased with the reception we’ve received from the communities who’ve welcomed us.”
As the retail landscape continues to evolve, it remains crucial for discount retailers to adapt and innovate in order to survive and thrive amidst rising competition and changing consumer expectations.
