Why discount stores are struggling to survive

In this economy, you'd think these retailers would be racking up the sales. That's not the case.

By MSN Money Partner Jul 29, 2014 1:36PM
Manager Doris Oransky arranges merchandise at a Dollar General store in Arvada, Colorado on June 2, 2009 (© Rick Wilking/Newscom/Reuters)By Ashley Lutz, Business Insider

Discount stores are slowly dying. 

Monday, Dollar Tree (DLTR) announced it would buy Family Dollar (FDO), a chain that is in the process of closing hundreds of stores and firing workers. 

Other discount stores have been struggling as well, writes Heidi Moore at The Guardian. Fashion discounter Loehmann's filed for bankruptcy, while Wal-Mart's (WMT) sales have declined for the past five quarters. 

"There’s just not enough money deployed by American families to keep all the discount chains in business," Moore writes. 

Dollar stores saw their heyday during the recession, when middle-class shoppers came to buy smaller, cheaper packages of household necessities like toilet paper. 

While middle-class shoppers have enjoyed economic recovery, America's poorest consumers have not, write Paul Ziobro and Shelly Banjo at The Wall Street Journal. Money spent by households earning less than $30,000 has been flat since 2008, The Journal reports, citing the Bureau of Labor Statistics.

Total income for that group fell 1 percent between 2004 and 2012. 

The merger of Dollar Tree and Family Dollar could further crunch Wal-Mart, according to the Journal.

With 13,000 stores between them, the new dollar store will be in a better position to negotiate lower prices from suppliers. This could challenge Wal-Mart, which is already more expensive than dollar chains. 

But it's possible that no amount of discounting will win back these struggling shoppers. "A cash-strapped consumer can’t keep buying forever, no matter how low prices go," Moore writes. 

More from Business Insider
Jul 29, 2014 2:26PM
There's too many of them. That's always the way in this country. Somebody is successful at something, and imitators pop up everywhere, or the store over expands putting one on every corner.

We still aren't employing people the right way. We need full time positions. No one in the lower middle class has money. Family Dollar closing stores and firing people is not a good sign of the economic future. Where is the next level? Sorting through garbage or growing your own food?

I see bad things for the rest of us (Not Wall St) in the next 2 years. Hopefully we get a President who is adept in matters of job creation.

Jul 29, 2014 2:13PM
but wait I thought we were in a recovery?  LOL
Jul 29, 2014 4:18PM
I buy stuff on sale or do with out.  I hit yard sale's, and thrift store when I can.  Still having one hard time of making it.  Glad I know how to can and do sewing.  I see down the road, hard time's getting worse!!!
Jul 29, 2014 5:15PM
"The middle class is enjoying a recovery"......????  huh?...where?...

Jul 29, 2014 4:03PM
They sell crap and treat you like crap.  I'll just keep my money.
Jul 29, 2014 4:50PM
When it comes to retailing, innovation does not come to mind. ME TOO does not win customers, it splits and splits again. Woolworths, W T Grant, S S Kresge ring any bells? The big four catalog houses, Sears, Montgomery Ward, J C Penny and Spiegel ring any bells? Zayre, Ann and Hope, Almy's, Orbit, Mammoth Mart and Kings discounters, ring any bells? Circuit City, Big Buy and Ultimate Electronics, ring any bells? Macy's and Gimbels, who is still here? Macy's did business with many different named stores selling the same merchandise. What did Macy do? They closed or consolidated their store names to become only Macys with even bigger sales volume and stock worth. Remember Eagle Shoe, Thom McCan and Fayva shoe stores? Gone with the wind. The economy has nothing to do with these stores, it is overlapping for the same shopping dollar. Years ago there was a food store, appliance store, shoe store, hardware store, lumber yards, furniture store, clothes for women, kids or men and not all three. Curtains, drapes and bed linens. Today, stores want to be a one stop shop and they have become dabblers of everything and masters of nothing. Super stores with minimum wage workers. Not like years ago where you were hired with 90 days trial under an experienced manager who really trained the new person. In 90 days you became permanent or were let go.
Jul 29, 2014 4:11PM
recovery?  i went to my mail box and found a random resume in there   people are walking door to door and leaving these now.  there is no recovery and money is getting tighter.   time for a real president and harry reid needs to go. 
Jul 29, 2014 4:08PM
the economy sucks, so even the normal middle class are not buying other than the basics.  the ones on welfare and government handouts dont shop like it is theri money and only buy or aquire top name brands not normally found at discount stores.  make them have a real budget (  something our government cant do) and then they will see what it takes to make ends meet 
Jul 29, 2014 4:18PM
Family Dollar has been building new stores here in NC but now they sell out what's up with that?
Why would you be putting money into new stores when you're trying to sell out, go figure.
Jul 29, 2014 4:54PM
Probably a good thing, in the long run. Cities are overrun with these dollar stores, like Starbux has saturated the market. Walmart needs some competition to keep it from owning the world! LOL
Jul 29, 2014 5:34PM
These retailers need to take a lesson from Henry Ford's book.  A lot of their customers are their employees - if they continue to not pay them a living wage, they have no customers. The people who are in teh recovery don't need to shop at the discount stores anymore, and have traded up to better quality and better service.  So the discounters suffer.  Natural economics.
Jul 29, 2014 5:24PM
They just opened some Aldis stores in the Houston last year...Wife and I have moved alot of our grocery shopping to them due to their prices...Hard to beat $1.99 gal of milk and .79 cent doz eggs
Jul 29, 2014 4:19PM
Jul 29, 2014 6:09PM
What goes around comes around.  Drive down the wages and hours of your workforce for 30 years and eventually your workers will be too poor to buy your stuff.  Success in lowering costs eventually equals failure to generate sales and profits. In an an economy that is 70% consumer driven, you would think that more employers would understand that simple equation.
Jul 29, 2014 2:12PM
Hoards of millions unemployable kids produced by union public schools/broken families the last 20 years + is the problem, this is by design sadly as the poor vote democrat no matter what. Slap an ebt sign by the door and watch sales rise.
Jul 29, 2014 6:27PM
Where do the business gurus thing the money to buy their merchandise is going to come from? The average citizen is tapped out.. That's the fruits of the Race To The Bottom economy ushered in by Ronald Reagan trickle down economics. Nothing trickled down, the rich just got richer. Keep cutting wages and keep shooting yourself in the foot.
Jul 29, 2014 5:41PM
America's Broke.  Trillions. That's with a T folks. Future prosperity and middle class spending is a huge FANTASY.
Jul 29, 2014 4:58PM

They seem higher on some of their merchandise, and the quality of some of their goods are cheaply made.  Their customer service is awful. 

Jul 29, 2014 5:55PM
Because people are tired of the garbage they sell?
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