Discount chains tweak product mix to drive demand, control inventory

While the current economy might seem like a sweet spot for dollar stores and discount chains, not all of them have performed well. Family Dollar plans to close 600 locations this year, and the West Coast-based 99 Cents Only Stores declared Chapter 11 bankruptcy earlier this week.

As analysts have pointed out, these companies made a number of strategic missteps, and now those discounters that are still standing—such as Dollar General, Dollar Tree, and Big Lots—are tweaking their assortments with the goal of avoiding a similar fate.

Laurence Brenig-Jones, VP of product strategy and marketing at Relex, a supply chain management platform that works with Dollar Tree and 99 Cents Only Stores, told Retail Brew that the sector is “very focused on having a highly curated range” of products.

This curation or selection process is generally called “range planning,” and it appears to be a crucial factor in how discounters plan to drive demand and control inventory going forward.

Less is more: How exactly discounters are range planning seems to differ significantly between the major players. Dollar General, for instance, recently made it clear that less is more when it comes to assortment.

The company said it expects to reduce the net number of SKUs by 1,000 this year. CEO Todd Vasos told investors during an earnings call that this reduction “will allow us to sell through the remaining inventory while seeking to minimize the amount of related clearance markdowns.”

Dollar General is shedding SKUs at the same time that it’s reducing its non-consumable inventory—a category that it acknowledged is facing pressure—and seeing an uptick in consumable sales.

More products, more flexibility: The strength of the latter category is one reason Dollar Tree is taking a different approach with its assortment, adding SKUs at different price points, sometimes for the same type of product, to give customers more options. The initiative, called More Choices, aims to add 300 items costing between $1.50 and $7.

“The underlying premise here is that we can present a more relevant assortment to our customers if we are free to offer items at a variety of price points,” CEO Rick Dreiling told analysts last month.

This process was underway throughout 2023, as the company netted 900 new SKUs. 

Newer products, more demand: Big Lots, meanwhile, stressed that its goal is to bring in more new products and have them represent a greater share of its total SKUs.

“We’ve been focused on less depth and more breadth in our assortment, so our customers will have to act more quickly and shop more frequently to get these great value products while they’re out there,” CEO Bruce Thorn said in an earnings call.

New products’ share of total SKUs increased Q4 from the year before, according to Thorn, which helped drive demand in discretionary categories such as furniture. He added that 70% of its lawn and garden assortment are new products.

Moving upstream: Relatedly, Big Lots announced this week that it opened two new international buying offices in China and Vietnam, with the goal of becoming more competitive in the sourcing of products, particularly “closeout deals and extreme bargains.”

“Global sourcing is key to our ability to add newness and expanded assortment at extreme value prices for our shoppers,” Thorn said in a press release.

Brenig-Jones said discounters in general are moving toward “closer collaboration with their supply networks,” in part because there are “new players in the market,” such as Temu and Shein, showing the benefits of having closer ties with suppliers.

“Even if it’s not their industry, it’s definitely an indication of where there are benefits,” he added.