The ashes of Dirt Cheap another deep discount disaster

The last couple of years have been difficult for Deep discounters. Some of you may remember the Big Lots culling, which hit Houston late last year. Many of you are likely aware of Dollar Tree/Family Dollar’s plan to close 600 stores by year-end. Of course, the 99 Cents Only Stores chain plans to wrap up business by the end of May, which is now national news. It looks like we’re in a major shift for deep discounters, but the question is, what’s causing it? While I can’t claim to offer a full answer, I think looking at Dirt Cheap will provide insight into what’s happening. Starting with some background info, unlike the other retailers listed above, Dirt Cheap was regularly involved in “salvage sales.” Essentially, their merchandise comprised items that had been returned to stores like Home Depot, Walmart, and Target. It’s not a completely unique format, with even Wal-Mart attempting the game via their Bud’s Discount City chain. Dirt Cheap also purchased many closeout lots from these same retailers to give themselves more “regular merchandise.” These closeout lots comprised clothing, DIY supplies, and basic furniture/decor. The stores were dirty, messy places, but customers were willing to dig for deals. In the rural areas they operated, Dirt Cheap was celebrated for bringing Target products to areas where Target would never entertain adding a store. They even opened a distribution center in Marshall, TX, to help sort through their new and salvage merchandise. Their success in Texas prompted investment firm KKR to buy a steak in Dirt Cheap with plans to expand the chain. They would even expand into California, looking to try to bridge locations across the country, but then things soured.

Early in the pandemic, Texas stores started closing without much warning. The California operations suffered a similar fate as the first cracks began to show. Simply put, Dirt Cheap was stretching its operation too far. Unlike other deep discounters, which relied on closeout lots, Dirt Cheap primarily relied on salvage, and as the pandemic occurred, returns dried up. Dirt Cheap could still get their hands on some merchandise, like Amazon salvage, but it wasn’t enough. To add to the problems, this was right around the time when “Black Friday” or “Crazy Deal” stores began to open. The concept was to rent a cheap building, buy Amazon salvage pallets, and sell furniture out of the other half. The concept was a hit, and the furniture component is a big part of keeping these operations profitable. These types of stores are independently owned, sometimes with a partner or two, but are not any real form of chain. This allows them to keep costs and prices low. Which is something that Dirt Cheap has certainly had a hard time doing. In early 2023, Dirt Cheap closed about 20 stores across the South, including most Texas locations. Only Pasadena and Euless would be left from the ashes of Dirt Cheap. That is until I found while researching this article that two closed stores in the DFW area have returned. Garland and Corsicana. From my research, the Black Friday store concept seems to have not caught on in DFW as much as it has in Houston. Regardless, most modern reviews of Dirt Cheap bemoan the prices and compare what was once a great store to shopping at a thrift store. While it’s unclear what the future holds for Dirt Cheap, it seems likely that the best days of salvage returns and closeouts are long gone.