The closure not only marks the end of an era for price-sensitive consumers, but also serves as a wake-up call for even the most established companies to remain nimble in the face of a downturn. Increasing competition.
On Thursday, 99 Cents Only Stores, a leading discount retailer in the Western United States, announced the closure of 371 stores across Arizona, California, Nevada and Texas. Liquidation sales of in-store products have already begun.
In a statement, interim CEO Mike Simoncic, who recently resigned, lamented the need for the decision and the formidable challenges the company has faced in recent years. These include the unprecedented impact of the pandemic, changing consumer preferences, increased levels of contraction, inflation and other macroeconomic headwinds. “We are deeply grateful to our dedicated employees, customers, partners, and community who have collectively supported 99 Cents Only Stores for decades,” he said.
The closure of the 99 Cents Only store highlights the broader woes facing discount retail chains across the country. More than 50 Big Lots stores closed last year, a trend that will continue into 2024. Dollar Tree recently announced plans to close 1,000 stores, including 600 Family Dollar stores scheduled to close in the first half of 2024.
Despite the initial shock, marketers understand the reasoning behind this decision, highlighting the persistent challenges faced by traditional brick-and-mortar businesses in an increasingly digital space. Masu.
Katya Varbanova, CEO of content marketing company Viral Marketing Stars, used to shop at 99 Cents Only stores when she was a student. She worries the decision will disproportionately impact low-income consumers who rely on such stores for affordable necessities.
“More than a decade ago, discount chains were the go-to for essentials like toiletries, cleaning supplies, and food. Plus, they saved me from being distracted by expensive, shiny products,” she says. said. “Consumers living paycheck to paycheck value saving money more than brand experiences.”
However, with the rise of e-commerce alternatives such as Amazon, Temu, and Alibaba, marketers anticipated these challenges. Reilly Newman, founder and brand strategist at branding studio Motif Brands, reflected on the new digital challengers shaping the industry.
He said: “I was surprised by this announcement, but it also makes sense. These dollar stores exploded in 2020. Their stock prices were crazy at the time, but due to market uncertainty, people That made sense because they were trying to protect their money. But these competing digital forces have driven out these low-cost providers.”
Quoting Jeff Bezos' famous line, “Your margin is my opportunity,” Neuman said digital brands can operate with low overhead and offer identical products at competitive prices. I explained how this is putting pressure on the business of brick-and-mortar stores.
At the same time, Newman expressed surprise at the complete closure of the 99 Cents Only store and suggested the company could have considered online options. He also noted that these brands' marketing spend is minimal compared to Temu, which launched Super Bowl ads as part of its U.S. expansion. “Price and strategy play a big role in any position. That is the main indicator. Now that indicator is in the pocket of most consumers' mobile phones. Who will win in that race?”
Some experts, like Linda Johansen James, CEO of International Retail Group, a boutique retail management and consulting firm, are concerned that e-commerce retail may not function well as a substitute for brick-and-mortar stores. There is.
“The disappearance of discount stores will leave a huge hole in the retail industry,” she says. “Alternatives may include thrift stores, online discount retailers, and community-driven swap meets and marketplaces. But these stores don't offer that convenience and have historically You can't even compare them because they might not be able to keep up with the established low price range. [these] shop. ”
For more information, sign up for The Drum's daily newsletter here.
