The team at Dollar General likes to say they're taking little slices of market share from a number of other retailers, be they giants such as Walmart or mom-and-pop corner stores. But somewhat lost in the overall exuberance about dollar stores is the fact that there's still plenty of competition between them. Witness the downgrade Monday by Morgan Stanley's Joseph Parkhill of Dollar Tree: The company is priced for perfection, he said, but also will have a hard time sustaining revenue growth in part because Dollar General is adding more $1 items.

Customers frequently overlap between the two stores, which should make it easier for Dollar General to steal Dollar Tree customers. Parkhill also estimates that 27 percent of Dollar Tree stores are within a mile of a Dollar General. Nearly 60 percent are within three miles.