Dollar Tree is officially cutting ties with Family Dollar in a $1 billion sale, closing hundreds of locations and offloading the rest. Family Dollar was acquired by its discount competitor in 2015 for $9 billion, resulting in a significant loss for Dollar Tree, according to CNN.
Neil Saunders, an analyst at GlobalData Retail, said this sale “closes the book on a sad and troubled chapter for Dollar Tree.”
The budget retail chains sinking—and the ones surging
Once considered a powerful one-two punch in the discount retail space, the breakup raises a bigger question: Are massive budget chains losing their grip? The answer is complex, as an uncertain economy pushes consumers toward budget-friendly brands. But competition is steep, and some dollar stores struggle to meet demand.
In April 2024, Family Dollar announced the closure of almost 1,000 stores, and 99 Cents Only filed for bankruptcy and confirmed it would be going out of business, per CNN.
According to Marketplace, Dollar General has seen a dramatic drop in traffic this year. Dollar General CEO Todd Vasos explained that low-income households are short on cash. And shoplifting, often due to financial hardships, has increased, further hurting the budget retail chain.
On the other hand, according to AInvest, Five Below is thriving. In Q1 2025, the store reported a 19.5% revenue surge. Despite inflation and looming tariffs, the brand still keeps most products at or under $5, offering customers consistency in a volatile economic climate. It’s able to do this thanks to stable sourcing partnerships in India and Vietnam.
Can dollar stores keep up with online giants?
In September 2024, the Financial Times reported that Walmart was outpacing budget chains like Dollar General and Dollar Tree. The dollar store industry is also competing with affordable online retailers, such as Temu and DHgate.
Amazon is coming for the dollar store industry too. As the online retailer expands its delivery range, it’s snapping up consumers in rural areas who typically rely on Dollar Tree and the like, per Motley Fool. Free same-day and next-day delivery is hard to resist, even for loyal dollar store customers.
In the back half of 2024, dollar stores were on the downturn. But with whiplash tariffs and inflation, they’re seeing both positive and negative signs. Consumers are looking to spend as little as possible on basic necessities; retail chains must maintain low prices amid unstable tariffs. Why are brands like Five Below flourishing, while others, such as Dollar General, are struggling?
Strategy is everything
It all comes down to strategic planning, a skill that companies like Walmart and Amazon have mastered. This could be a big moment for dollar stores—if they strategize wisely. Stores that choose to absorb tariff costs will stay competitive, but must navigate their already thin margins.
The industry is currently a rollercoaster ride, but brands like Five Below prove that delivering consistency keeps customers loyal. Stores that want to survive the tariff swings can take a page from their book, finding ways to stabilize product sourcing and maintain low prices.
Dollar Tree is making survival moves too. Shedding Family Dollar and varying product offerings to include more domestically sourced goods is helping the budget store stay afloat.
In this highly competitive budget retail landscape, the companies that emerge as leaders will be those capable of quick and clever adaptability, whether that means closing a horde of stores or rethinking product sourcing.
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