Dollar General and Family Dollar, two major players in the discount retail market, are facing increasing scrutiny over their pricing practices and compliance with state regulations. Recent inspections in Colorado revealed that Dollar General failed 15 out of 23 state inspections, leading to a settlement with Colorado’s attorney general for $400,000. This is not an isolated incident; both chains have been fined and settled with various states for overcharging customers, raising concerns about their business operations.
This pricing difference among these stores is shocking. This is particularly alarming considering their proliferation in low-income urban communities and rural towns in all 50 states. In fact, three out of four Americans live within five miles of a Dollar General store, so access to these small-format retailers is pervasive. Given these known facts the allegations of overcharging are extremely serious. Cash-strapped consumers rely on these stores for cheap goods, and that makes this story all the more heartbreaking.
Legal Consequences and Settlements
Dollar General has reached an agreement with Colorado. They’ve made similar agreements with New Jersey, Vermont, and Wisconsin on similar concerns. The settlements underscore the dangerous pattern of misuse and misleading pricing that has colored the company for years. Family Dollar was already burdened with major woes. A monthly inspection in January 2023 resulted in its fourth straight failure.
Family Dollar’s problems extend beyond Colorado. North Carolina’s Department of Agriculture & Consumer Services fined the frozen treat chain $1,200. Our prior visits revealed some major pricing discrepancies. Family Dollar settled with Arizona’s attorney general for $600,000 and reached an agreement with Ohio’s attorney general, which included a $250,000 allocation for a local food pantry. These settlements highlight that the issue of inaccurate pricing remains a problem at Dollar General as well as Family Dollar.
“Sometimes it is cheaper to pay the fines,” – Chad Parker, who runs the agency’s weights-and-measures program.
With both chains jumping into clearance sale level legal challenges, they’re under pressure to change their pricing models completely. They have to double check that they’re not running afoul of state laws.
Patterns of Overcharging
The pattern of overcharging at Dollar General and Family Dollar should alarm the companies and indicate dangerous business practices. Reports indicate that some stores have error rates as high as 88% at Dollar General and 76% at Family Dollar. This gap between advertised prices and actual prices leads to customers paying more than they need to on groceries, further gutting stretched budgets.
Corporate employees from both chains have revealed that these gaps in pricing usually result from the chains being understaffed and their displays not properly managing inventory. A specialty manager who tracked inventory on the Ohio and Pennsylvania borders reported that, “All the pricing was wrong in stores. These types of proclamations shine a light on the enormous problems of these deep-discount retailers.
“Overcharging even by a small amount per item can strain a really tight budget,” – Elizabeth M Harris, acting director of the New Jersey Division of Consumer Affairs.
In recognition of this evidence, both retailers recently committed to making pricing accuracy a priority. Family Dollar stated, “At Family Dollar, we take customer trust seriously and are committed to ensuring pricing accuracy across our stores.” Likewise, Dollar General should be disappointed when they don’t live up to their promise to customers to consistently provide the right price.
The Impact on Consumers
These overcharging practices go beyond inconvenience and financial hardship. They have the potential to deliver enormous impact to consumers who depend on these stores for access to critical goods. People living in low-income neighborhoods often have few shopping choices available to them, putting them at risk of the consequences of price variation.
A former store manager at a Dollar General in Connecticut remarked, “I didn’t want people to get screwed over, but I knew that it was happening.” Millions of low- and moderate-income customers depend on these retailers for honest, low prices. When they get to checkout, surprise costs pop up and sometimes leave shoppers feeling dejected.
“Until they’re called on it, they’re happy to let those scanner errors bring in the millions,” – Kennedy.
Both Dollar General and Family Dollar have admitted as much with regards to the burdens of keeping flat pricing all their wide stock keeping units. Lawyers for Dollar General stated, “It is virtually impossible for a retailer to match shelf pricing and scanned pricing 100% of the time for all items. Indeed, perfection in this respect is not only unrealistic, but not required by law.”
For all these defenses, consumers will be left to wonder just how reliable pricing at these stores is going forward. As leaders in the discount retail space, both companies must adapt their practices to better serve their communities while ensuring compliance with legal standards.