Too suddenly! The well-known retail giant in the United States went bankrupt

Suddenly!

The well-known discount retail giant "99 Cent Store" in the United States has declared bankruptcy!

Once with the high quality and low price of "less than 1 dollar", 99 cent stores once swept the United States and became the representative of the retail industry;

But now, with the Fed raising interest rates and high inflation, all costs have risen sharply, and the collapse of the 99-cent store is just a precursor to the collapse of discount retail companies amid high inflation in the United States.

As the economic situation in the United States deteriorates, low-income people are more cautious in spending, and the fall of the "99 cent stores" seems to be logical!

With the release of the "explosive" non-farm payrolls data in March, the expectation of interest rate cuts in the United States has "been declining", and the voice of the Fed not cutting interest rates or even raising interest rates this year has begun to emerge.

The United States has a long way to go in the fight against inflation, and more and more American giants are already showing signs of falling: layoffs, factory closures, and business closures......

01

Another retail giant in the United States has declared bankruptcy!

99 Cents Only, a once-popular discount retailer in the United States, recently filed for bankruptcy protection.

At the same time, the retailer, which has about 14,000 employees, announced that it will close all 371 stores, liquidate the sale and seek to sell assets such as properties to maximize value, and gradually liquidate all operations!

At this point, the discount chain brand, which was once known for selling its products for only 99 cents or less, has a history of more than 40 years.

Mike Šimončić, interim CEO of 99 Cents, said that in the past few years, the retail industry has faced significant and ongoing challenges, with the impact of the epidemic, changes in consumer demand, continued inflationary pressures, and "retail contraction" and other factors seriously affecting the company's ability to operate.

Retail shrinkage is an industry term that refers to the loss of inventory due to things like shoplifting, employee theft, and administrative errors.

According to the 2022 Retail Security Survey of the American Retail Federation, in 2021 alone, retailers across the United States lost about $94.5 billion by "shrinking"!

Due to the increase in shoplifting, more and more everyday items such as toothpaste, chocolate, laundry detergent and deodorant are being locked in cabinets by U.S. retailers.

From its peak to its decline, the "99-cent store" drew a perfect parabola and became a hurried passer-by of the times.

However, its fall is also a microcosm of the plight of many companies in the current round of high inflation in the United States:

Dollar Tree announced plans to close nearly 1,000 stores across the United States, Family Dollar announced the closure of 1,000 stores, and Dollar General announced its withdrawal from major cities to rural areas.

A wicked man is his own hell!

Industry insiders generally believe that the continued weakness in the performance of US retailers will accelerate their passive transformation.

On the one hand, the current macroeconomic environment in the United States is relatively stressful, with increasing operating costs such as logistics and manpower, but the purchasing power of low-income people in the United States has shrunk seriously, and almost all low-price retail industries in the United States will face collapse pressure;

On the other hand, Pinduoduo Temu's low price is unstoppable, and it may become the last straw that breaks the camel's back.

In short, the collapse of the 99-cent store is not accidental, and this scene is bound to continue to play out in the United States in the future!

02

How did the "99 Cent Store" start?

In 1982, American David Gold founded the "99 Cent Store" in Los Angeles, California, to promote the concept of single-price retail.

At the time, dollar stores were seen as dumping grounds for unpopular goods, but the Gold family made the stores bright and orderly, with a wide variety of products and good prices (most of them sold for only 99 cents or less), which became popular with customers, especially low- and middle-income earners, and gradually became one of the most representative chain brands in the discount retail industry in the United States, with operations in many states and about 14,000 employees.

In 1996, the company went public on the New York Stock Exchange, and Dave Gold became a billionaire.

In 2008, the subprime mortgage crisis in the United States continued to develop, triggering the worst global financial crisis since the Great Depression of the last century.

The 99-cent store has become a sought-after presence in the retail market under pressure from rising costs and inflation, and the Dave Gold family has sold a majority stake in the company.

At the end of 2011, the company received a $1.6 billion take-private takeover and was subsequently delisted from the New York Stock Exchange.

In 2013, Dave Gold and the rest of the family management team left the company.

In recent years, due to the pressure of inflation and other factors, it has become increasingly difficult for stores to operate, and finally it has become difficult to support.

It is worth mentioning that in the case of serious inflation in the United States, the price of goods in the "99 cent store" has risen seriously, and it has long been more than 99 cents!

In 2008, in the face of rapidly rising inflation, soaring food and fuel prices, and a higher minimum wage, the 99-cent store announced that it would deviate from its long-standing pricing strategy;

Announced a 0.99-cent increase in the price of all items so that each item would actually automatically show up in the computerized cash register system as $1 (unless thousands of items are purchased). And by that time, there were already items in the store that were priced at more than $1 each.

03

What can you buy for 99 cents?

For example, 8 packs of instant noodles, a dozen or so oranges, a bottle of oyster sauce, a carton of eggs, a bottle of milk, a packet of vegetables, a miniature radio, a pair of gloves, 4 rolls of toilet paper, a large bottle of cola drink, a small can of canned sausages, a large bag of biscuits, 4 gel pens, and three bowls of instant noodles......

In fact, in the United Kingdom, the United States and other countries, the "1 dollar store" and "1 pound store", which are flooded with a large number of cheap goods, are important channels for low-income people to shop and make ends meet.

However, as the inflation problem in Europe and the United States intensifies, the cost of goods is getting higher and higher, and these stores either choose to maintain prices and swallow losses, or there are more and more high-priced goods, so that consumers who enter the store feel "deceived".

The stores and propaganda are in the name of good quality and low price, but in fact, they have long been "not worthy of the name", and they have always maintained a hypocritical style of "inconsistent words and deeds"!

In response to the high inflation it has created, the Fed raised interest rates 11 times in a row from March 2022 to July 2023, pushing interest rates to their highest level in 23 years.

As of last month, U.S. inflation has fallen from a peak of 9.1% to 3.2%, which is still above the Fed's 2% target but does give the Fed a reason to cut interest rates this year.

At this point, however, the old inflationary nightmare seems to be returning.

According to a report on the website of the US "Newsweek" quoted by the overseas network, due to the increase in employment costs, US employers are constantly laying off employees, and the current unemployment situation in the United States has reached a "severe milestone".

The data showed that the number of layoffs in the United States in March hit a new high since January 2023, reaching a terrifying 90,309;

Among them, 14,224 people were laid off in the technology industry, and nearly 29,000 people were laid off in the financial industry in the first quarter, with giants such as Apple, Microsoft, Amazon, and eBay bearing the brunt!

04

Some people say that the 99 cent store represents an era of great value for money, and its end may represent the end of an era!

Rising wages, inflation, and higher losses due to contraction have reduced retailers' profits in a deeply discounted industry with extremely low profit margins.

At present, in addition to the "99 cent store", some other mainstream $1 stores in the United States are also doing very poorly:

In March, Dollar Tree, another long-established discount retail business in the United States, announced that it would raise the price of goods by a large percentage to more than $1.

Coincidentally, Family Dollar, the most frequently contacted American public, also announced the closure of 1,000 stores, of which more than 600 will be closed within this year, and the remaining 300 will close in the distant future.

Another well-known store, Dollar General, announced that due to the greater pressure of theft in some cities, it plans to close these stores with high management costs in the future, and gradually withdraw from large cities and move to rural areas.

According to Earnest Analytics, in 2023, Dollar General's market share fell by 14 percentage points from 57% in January to 43% in November.

Dollar Tree's market share also declined at the same time, from 32% in January to 28% in November, a drop of nearly 4 percentage points.

The reason for this is that, in addition to the impact of the market environment, the traditional low-price retailers in the United States have collectively lost under the encirclement and suppression of Temu.

Data shows that after Temu entered the United States, its market share quickly grew to 17% as of November last year.

It is said that foreign monks can recite scriptures, but in fact, it is the same for the United States!

The same market, different ways of operating, the "99 cent store" lost, but Temu from China won.

Why is that?

There is no reason for it!

The popularity of Fat Donglai's "phenomenal" has triggered new thinking from Chinese retailers, and it has clarified that if you want people to recognize, it is nothing more than one point:

It is not only higher than the industry standard, but also cost-effective, that is the explosive Tiantiao!

Resources:

"Too Suddenly! Well-known Enterprise, Filing for Bankruptcy, ...... with About 14,000 Employees", Brokerage China

"Rising burglary incidents raise concerns as U.S. retailers lock lockers for daily necessities such as toothpaste", The Paper

"Prices have risen too hard, 99 cent stores are 'not worthy of the name', and all 371 stores in the United States will be closed", Red Star News

"Too sudden! The U.S. retail giant announced that all 371 stores were closed, and the clearance sale has a history of more than 40 years, and it was once a "shopping paradise" for low- and middle-income people", National Business Daily