David Gold, the modest and visionary founder of 99 Cents Only Stores, started his retail empire in Los Angeles on Friday, August 13, 1982. The retail chain, which had gone public on the New York Stock Exchange in 1996 (with an initial share price of 99 cents, naturally) grew over a 30-year span to a valuation of $1.6 billion when it was acquired by Ares Management in 2012. On April 7, 2024, 99 Cents Only Stores LLC filed for Chapter 11 bankruptcy protection and announced it planned to liquidate and close all its 371 stores in California, Arizona, Nevada, and Texas and let go over 10,800 part-time and full-time employees as a result of declining sales, increased expenses and combined debts of $456.9 million.
The story of 99 Cents Only Stores is a testament to the insight of David Gold and underscores the dynamic nature of the retail industry. It highlights the interplay between consumer behavior, economic conditions, and retail strategies. As the retail landscape continues to evolve, the lessons learned from the rise and fall of 99 Cents Only Stores will undoubtedly shape the strategies of dollar stores, grocery chains, and mass merchandisers in the years to come.
The Beginning
When in his 30s, Gold inherited a family liquor store in downtown Los Angeles. He tested the concept of selling goods at 99 cents as he displayed bottles of wine at that price point, which quickly sold out and led him to believe that his future was intertwined with that magic number. Gold discovered that items priced at 99 cents sold significantly faster than those at slightly higher, or lower price points. And so, the 99 Cents Only Store was created. This psychological pricing strategy, combined with a no-frills shopping environment, allowed Gold’s store to offer an unprecedented value proposition to the cost-conscious consumer. The tale of the 99 Cents store is a fascinating chronicle that reflects both the ingenuity of American entrepreneurship and the evolving needs of the American shopper.
Boom Times
The 1980s and 1990s saw a boom in the popularity of 99 Cents stores, fueled by a perfect storm of economic conditions. Inflation, wage stagnation, and a growing disparity in wealth led many to seek out the most value for their dollar, a need these stores met with aplomb. They proliferated across the United States, particularly in urban areas and communities that were underserved by traditional retailers.
David Gold’s success was due to his innate buying skills which he handled personally for many years, according to his son Howard who was Executive Vice President. He told the LA Times at the time of his father’s death that his dad “was proud of what [the products] he sold and wanted 99 Cents Only Stores to look clean and well-organized even though they were closeout stores.” In filings with the SEC, Gold’s stores average about 16,000 square feet, whereas the average Dollar General is about 7,400 square feet. The senior Gold’s focus was to buy only quality, brand-name products that he purchased in enormous quantities from suppliers.
His stores weren’t just selling products; they were selling a concept—the idea was that you didn’t have to be wealthy to have access to a wide array of goods. From groceries to household items, 99 Cents Only Stores offered an array of products that defied their low price point; according to the SEC filings grocery items accounted for 57 percent of sales. This era also saw the expansion of the 99 cents concept into the broader dollar store category, with competitors like Dollar General (which opened its 20,000th store this year) and Dollar Tree (with over 16,500 stores) entering the market, each vying for a piece of the bargain retail pie.
Evolution and Adaptation
As the new millennium approached, the landscape began to shift. Rising operational costs, inflation, and increased competition from both dollar stores and big-box retailers forced many dollar-category stores to adapt or perish. Some stores began to diversify their pricing strategy, offering products above the dollar threshold to maintain profitability as well as adding produce, fresh, refrigerated, and frozen foods. In 2008, 99 Cents Only Stores broke their 99-cent barrier to adjust for inflation, rising food prices, rising fuel costs and a higher minimum wage. Dollar Tree reported its 2022 average at approximately $17 per transaction and expanded its offerings with the Dollar Tree Plus concept with items selling up to $5. Dollar General’s average transaction is nearly $21, claiming growth in sales of frozen and refrigerated foods. In 99 Cents Only Stores April 7 bankruptcy filing, the company said that the percentage of merchandise priced at 99 cents or lower was less than 50 percent in 2023.
The Future
The decline of 99 Cents Only Stores didn’t happen in a vacuum. It was a bellwether for shifting consumer priorities and the evolving retail landscape. Bargain retailing is set to evolve further. Dollar stores are likely to continue their expansion, even though the closing of 99 Cents Only and Dollar Tree’s announcement that it plans to shutter 1,000 locations has created a stir in the category. The dollar store category is increasingly blurring the lines with traditional grocery and mass merchandisers. This will lead to a more competitive environment, driving innovation in pricing strategies, store formats, and customer engagement, as well as from the growth of hybrid formats like Grocery Outlet and more traditional discounters like ALDI and Lidl. Sustainability and ethical sourcing are becoming increasingly important to consumers, even at lower price points. Dollar category retailers should align their value propositions with these emerging priorities, as has ALDI, without compromising on affordability, and will stand to gain a competitive edge.
Technological advancements will also play a pivotal role in this category which traditionally has not invested in leading-edge retail technologies, especially in their stores. Enhanced inventory management systems, dynamic pricing models, and sophisticated consumer analytics will allow dollar store retailers to adapt more rapidly to changing market conditions and consumer preferences, which seems to be a major cause of the failure of 99 Cents Only.
Conventional grocery stores and mass merchandisers must adapt to this increasingly competitive landscape driven by these discounters and dollar stores if they want to survive. Differentiation among categories will be the key to success – as competing on pricing isn’t a viable long-term option. Traditional grocers must offer unique (and proprietary) products and superior shopping experiences, and leverage technology to offer personalized promotions and rewards.
Thank You, David Gold
The story of 99 Cents Only Stores is a testament to the insight of David Gold and underscores the dynamic nature of the retail industry. It highlights the interplay between consumer behavior, economic conditions, and retail strategies. As the retail landscape continues to evolve, the lessons learned from the rise and fall of 99 Cents Only Stores will undoubtedly shape the strategies of dollar stores, grocery chains, and mass merchandisers in the years to come. In this ever-changing environment, flexibility, innovation, and a keen understanding of consumer needs will be the keys to success.
