Dollar Tree could gain market share from 99 Cents’ demise

The 99 Cents Only stores recently filed bankruptcy and announced the closure of its 370 stores in Texas, California, Nevada and Arizona. Dollar Tree will likely pick up the market share from the closing 99 Cents Only stores, according to market watchers.

Corey Tarlowe, a retail analyst at Jeffries, said the closures represent a robust market share-gaining opportunity. He said Dollar Tree and 99 Cents Only stores have overlapping store footprints. He adds that 99% of the closing 99 Cents Only sites are located within 5 miles of a Dollar Tree and more than half (57%) are located within one mile. That compared to 69% of Family Dollar store locations in proximity to closing 99 Cents Only stores.

Financial education platform Earnest reports that credit card data indicates considerable overlap of customers between the discount formats. Earnest reports more than 77% of 99 Cents Only customers also shopped at Dollar Tree in the past 12 months.

“Oversaturation of dollar stores and lack of economic scale are the two biggest dynamics that worked against the 99 Cents Only stores,” noted David Naumann, a retail marketing manager at Verizon and a contributor to RetailWire Brain Trust.

He said with just 370 locations, 99 Cents Only could not compete with the massive scale of Dollar General and Dollar Tree. Without the scale, the cost to procure merchandise was more expensive and compromised margins.