The economics of dollar stores

https://thehustle.co/the-economics-of-dollar-stores

by pseudolus • 5 years ago

285 205 5 years ago

kcorbitt2• 5 years ago

I absolutely love dollar stores. I recently needed to buy a set of crayons for my son and the options were $5 on Amazon, $4 at Target or $1 at the local Dollar Tree (and the pack had 36 crayons, vs 24 from the other sources!).

They're not the right place for everything, but for kids' art supplies, cleaning products, party paraphernalia, seasonal decor, etc, they can't be beat. They seem to have a pretty strong stigma for some reason (seems like most professionals wouldn't be caught dead in one) but they shouldn't. Great place to shop!

melling• 5 years ago

The article claims that Dollar Stores are more expensive. They often sell smaller amounts to meet the price, but unit cost is more

voisin• 5 years ago

Could be that they lure people in with lower unit costs on some key, easily comparable items, and then the customer ends up buying a bunch of higher margin items too. That happens to me often - go in for something I know is way cheaper than at Walmart and directly comparable, and end up picking up a few other things that may not be a killer deal but saves a second stop at another store.

powerapple• 5 years ago

That's not "expensive". Expensive is that I need to pay $1.99 for something and I have throw away half of it because I couldn't use it. I'd rather spend $0.99 for 1/3 the quantity. I am spending less money after all.

dataviz1000• 5 years ago

I was thinking about this the other day. Instead of raising prices on junk food, they are making the packaged size smaller. This might not be a bad thing in the US because of the obesity problem. Since people will be eating less unhealthy food they might save on health care costs.

II2II• 5 years ago

I agree with the claim that dollar stores are sometimes more expensive, but asserting the unit cost is higher is an over generalization.

One of the nice things about dollar stores, in my part of the world, is they don't play games with sale prices. Sale prices make it easy to cherry pick prices seen at other retail chains once or twice a year then claim they are cheaper. In many of those cases, the product is only cheaper per unit because they force you to buy the product in larger quantities (e.g. by taping or shrink wrapping multiple units together). That may be fine if it is a product where you can plan ahead, has a long shelf life, or is something you use in quantity. It is not so great when it increases waste since it is a "just in case" product or you won't be able to use it before it expires. If your aim is to reduce waste (or resources or money), you may be better off buying the product when or as it is needed. At any particular moment in time, the unit price at a dollar store may very well be lower than that of other retailers.

Spooky23• 5 years ago

Like any retailer, buyer beware!

Some things at dollar stores are great deals, many things are not. You just need to know your prices.

“Dollar General” and “Family Dollar” stores tend to target poorer buyers who make poor pricing decisions from many points of view for a variety of reasons, ranging from poor access to transportation to poor financial literacy.

Bostonian• 5 years ago

I like them too, but the article notes that their prices per unit are usually a bit higher than at other stores.

tjoff• 5 years ago

I guess (we don't really have them here) that while they might never be the cheapest option they will most often be a cheap option.

And where every other store is cheap on some stuff and absolutely ripping you off on others it is kind of nice to know with greater confidence that you are not being ripped off.

Also, if a 10x pack costs 90% of a 24x pack at the regular store a dollar store might be decently priced for a 8x pack. Which is fantastic if you only need and want ~5.

dopidopHN• 5 years ago

Your whole country is exotic to me, and I formed my opinion on things as a old adult.

For me dollars store are the reliable place to buy toxic stuff, cleaning supplies and in general non-food item.

I like that it’s small and to the point.

The food there make me sad, though. It’s almost exclusively crap.

busymom0• 5 years ago

The food there make me sad, though. It’s almost exclusively crap.

It depends upon what type of food you are looking for. If you are looking for branded things like pop, chips, chocolates/candy etc, then they are very good deal.

astura• 5 years ago

My local Dollar Tree has excellent food - sure, no fresh vegetables but there are staples plus name brands that costs 2x-5x at the local grocery stores and other stuff that's not even available at other stores (specifics off the top of my head - Zapp's Voodoo Heat chips, I've never seen them anywhere else besides the dollar store).

Obviously the stock is somewhat inconsistent.

qPM9l3XJrF• 5 years ago

My local Dollar Tree offers 12 eggs for a dollar, a loaf of bread for a dollar, a decent sized bag of frozen berries or vegetables for a dollar, 2 pounds of rice for a dollar, a 26oz can of baked beans for a dollar. That's not exactly crap.

myself2482• 5 years ago

cleaning supplies

Yikes! Cleaning supplies and medical stuff are things I will _never_ buy from a dollar store. Most of the cleaning chemicals have more fragrance than active ingredients, they never work well but the place smells like you cleaned like mad. I have to assume the medical stuff is just as poor quality, but I have no way of assessing it.

It also bothers me that a lot of the cleaning products are packed in bottles shaped like drink bottles; an illiterate or merely distracted person could be in for a nasty surprise.

We agree on the food, for sure. It never _says_ it's expired, but it tastes ten years old.

One thing I always get at the dollar store is lint traps. The big box charges 3x the price for an absolutely equivalent product. Lint traps and office supplies. I don't think I've ever bought envelopes or binder clips anywhere else.

herbst3• 5 years ago

You could just shop in China yourself (AliExpress)

GhostVII• 5 years ago

Sure, and wait a month for an empty box to show up

mrfusion2• 5 years ago

Agreed. The cheapest I could buy a plastic spatula on amazon was $7? Bought one for a dollar instead. Seems to work fine.

lotsofpulp4• 5 years ago

That might be one of the easiest use cases for me to justify spending more on quality, not that I would trust Amazon to sell quality, but from a reputable brand or retail store.

I am assuming that a plastic spatula will degrade when heated up, and a lower quality plastic will have a higher probability of degrading and depositing plastic into the food being cooked, which then gets ingested of course.

permo-w2• 5 years ago

$7? You absolutely did not look very hard. I just checked UK Amazon and found them for £1

axiolite2• 5 years ago

I had a friend who bought a $1 spatula. He's dead now.

okareaman• 5 years ago

They are great if you stay away from certain things like batteries, which are usually drained or near dead.

axiolite2• 5 years ago

Travel supplies are the big draw for me.

Most stores charge about as much for a mini tube of toothpaste (or mouth wash, whatever) as a full-sized, name brand mega sized one. Dollar Tree will usually sell you a multi-pack of minis for $1, cheaper than the bulk purchase. AND the more expensive will usually have ANTI-features like a flip-top instead of basic screw-on lid... No thanks, I prefer the toothpaste to stay in the tube, I'm not buying it to repaint the interior of my bag...

Toothbrush at Walgreens: $3

Toothbrush at a gas station: $8

Toothbrush at Dollar Tree: 4 for $1

They also have the added advantage of often being conveniently located. Little store around the corner, instead of fighting through traffic, going miles to the central big-box retailer everyone does their big shopping trips at.

justinjlynn2• 5 years ago

Ah, I see, so they make quite a bit of their profit by selling smaller quantities of lower quality goods at higher per unit prices through framing the value proposition carefully and managing expectations to their benefit. Makes sense, given the markets they target, that they're exploiting the effects of the 'Boots' theory of socioeconomic unfairness and quite successfully too.

kcorbitt2• 5 years ago

I realize the article mentions that sometimes happens, with their example being a 0.8oz deodorant. But as a frequent shopper it isn't my general experience. I often compare prices and on a unit cost basis (so controlling for the sometimes smaller dollar store quantities) you can almost always buy the same brand from a dollar store for a steep discount compared to a traditional supermarket or Target.

In general I feel like there's a tendency to view products marketed at poor people as exploitative. That's sometimes merited (payday loans!) but honestly, dollar stores are really effective at providing a good product at a great price.

gambiting2• 5 years ago

>That's sometimes merited (payday loans!)

That's also a very interesting discussion to have because from what I understand, payday loans businesses exist because the alternative is worse - people who are desperate will always borrow money from someone, so it's better that they borrow from a well regulated business rather than from the "pay or we'll break your legs" kind. And then the 1000% APR is argued that it's the actual cost of risk with these loans since they default so often.

justinjlynn2• 5 years ago

buy the same brand

That doesn't mean they're the same product or quality, however.

celticninja4• 5 years ago

Similarly in the UK, whilst there are certainly £1 store offerings from brand names which are smaller than their traditional supermarket offerings, the vast majority of products are end of line or bought up cheaply in bulk where they otherwise we're not selling. I have had success in the past finding items which I have resold on eBay for significantly more because their true value is higher.

amcoastal• 5 years ago

Definitely! Dollar tree is the place to get things like dishes and cleaning supplies. You get the same bottle for $1 that is 1.88 at Walmart or whatever. I'll only buy things that the dollar store I KNOW are cheaper though, sometimes you'll think you're getting a deal and then the same product at Walmart is 90 cents.

heresie-dabord• 5 years ago

The data presented suggest that poor, uneducated (innumerate) populations of consumers try to find most of what they need at one store and do not calculate price per unit (PPU).

Or if the poor are aware of PPU disadvantages, they have a sense that shopping elsewhere isn't worth spending more time and energy.

So the $DiscountFranchise just needs to be able to locate itself as close as possible to the socioeconomic-target population.

baybal2• 5 years ago

Go and run around city looking for some widget. You will spend more on fuel/public transport.

brtkdotse• 5 years ago

In case someone wonders about Boots theory - https://samvimesbootstheory.com/

sfifs3• 5 years ago

There's a lot of equivalent store types in Asia. The Kirana stores in India, the Sari-Sari stores in Philippines, the neighborhood groceries in much of South East Asia etc. A very similar dynamic applies - the shoppers buy several times a week, maybe even every day because they're daily or weekly wage earners.

bradleyjg6• 5 years ago

Bodegas in NYC make no pretense about being a good deal. It’s understood that you are paying for convenience.

chrbarrol• 5 years ago

They also "bulk up" food products, for example introducing filler into meat products such as water and salt [1] such that they can sell a smaller amount of meat for the same price without the consumer noticing.

[1] https://www.youtube.com/watch?v=ONOoKtAH53E

hytdstd• 5 years ago

It's fascinating how the coverage map is so drastically different from the typical US population map. In particular, they completely cover the east half of the US, but not the west.

Hinrik• 5 years ago

Drastically different? It looks almost identical to a map of the U.S. where each dot represents a town: https://www.visualcapitalist.com/mapping-population-density-...

Mountain_Skies• 5 years ago

Give them time. They will eat the entire country.

https://www.youtube.com/watch?v=DIqC5y1zm-4

There does seem to be an opportunity to bring the same type of store to the western states but the low population portion in the interior west might keep it from being economical to operate distribution centers that incrementally cover over more and more western territory. They'd need to invest in a distribution network in the western states that were mostly independent from the eastern ones. That might be too much risk for their low margin business model.

vel0city• 5 years ago

Uh, it seems like it tracks a US population map pretty well. The Western half of the US is largely pretty sparse with only pockets of densely populated cities.

https://commons.m.wikimedia.org/wiki/File:US_population_map....

june_twenty• 5 years ago

In the UK we have poundland which is the same idea. To be honest I love it. I get protein bars, chewing gum, cans of coke, milk and sweets cheaper than anywhere else.

robjan• 5 years ago

From what I understand, a lot of the Poundland goods are grey market parallel traded goods. e.g. Colgate toothpaste manufactured in the UK but intended to be distributed in Poland. The manufacturer often sells them at a lower margin in lower income markets because some money is better than none.

jfk13• 5 years ago

Sometimes the foreign-language packaging of an otherwise-familiar brand item makes this really obvious!

xtracto• 5 years ago

I have fobd memories of Poundland, 99c and Home Bargains while living in the UK as a poor international student (poor meaning I lived with a scholarship from my country).

NikolaNovak• 5 years ago

Interesting; most stores are similar or same brands in Canada vs USA (with noble exception of Tim Hortons). But we have Dollarama and Buck Or Two, whereas top US are completely different.

I wonder if it's because Canadian supply chain logistics tend to be different (Target famously flopped for not taking that into account), or some other factor.

nelblu• 5 years ago

Dollarama also doesn't accept returns. Not sure about the US stores, but that is another reason why they must thrive.

wffurr• 5 years ago

Loonie Toonie was a pretty entertaining name for one. I didn’t get it at first when I visited.

Clewza313• 5 years ago

100 yen (approx $1) have long been huge in Japan too, and their business model is even simpler: most of what they sell is plastic and made to order in China in huge volumes. They have grocery selections too, but nothing that would require refrigeration or otherwise spoil quickly. And while hardly luxury, they're also not down-market in the way that Dollar X's in the US are, many are located in central business districts and there's no stigma to shopping in one.

https://en.wikipedia.org/wiki/100-yen_shop

tkgally• 5 years ago

Daiso, the largest chain in Japan, designs a lot of their own products, and the shear variety of some product lines is one of the stores’ attractions. Twenty years ago, before going back to the U.S. from Japan for a family reunion, I bought fifty folding fans, each with a different Japanesey design, at Daiso as gifts. The relatives I handed them out to seemed delighted, and they cost me only a buck apiece.

Until I started working from home last year, I wore a suit and tie to my job in Tokyo. I have a collection of more than two hundred ties, each one different, all looking reasonably decent, bought for a hundred yen apiece at Daiso ten or twelve years ago.

mcshicks2• 5 years ago

There are Daiso locations in the US (and I think many other countries now), at least in California. They aren't as good as the ones in Japan, and they have somewhat different items in one location than another. But they do have lots of interesting stuff, although most of it is $1.50 and up. The tool section is pretty neat as well as their stationary section.

new299• 5 years ago

Right, and it appears to be a completely different model than that presented in the article.

What’s interesting is that a significant fraction of the products at Daiso are made in Japan. Not by any means the majority, but a lot of the simple injection modeled products (containers), some of the ceramic plates and bowls, some of the chopsticks.

It’s pretty shocking to me that they can make these products domestically and sell them for ~$1. But I suspect for simple products the economics of making these items locally still makes sense, when compared with shipping a bulky object which is largely air.

clairity2• 5 years ago

i love daiso. the one in little tokyo (downtown LA) is actually spacious, relatively-speaking. apparently ikea loves them too, as i've seen a lot of gadgets that are staple items at daiso make it over the years into the ikea catalog. little kitchen items are what i notice the most, but other things too.

eloisant• 5 years ago

I'm not sure about US dollar stores but there are really good deals at Japan's 100 yen shops. For example simple plastic boxes that cost 10 euros in France are at 100 yen in those shops.

So in Japan it's not just for poor people, there are items where it doesn't make sense to buy them anywhere else than a 100 yen shop.

wirthjason2• 5 years ago

They are popular because they are good. The products have good designs and reasonable quality, at or above the $1 level. The stores are bright, clean, and the staff friendly.

My guess is that they have a much more integrated supply chain than the stores in the US and can better understand what their customers want/need.

There is an air of quality around ¥100 shop shop and a stigma of $1 stores being junk. Any reasonable Okaasan takes it as a badge of honor finding good stuff and bragging about it.

zdragnar2• 5 years ago

I used to have the same opinion of dollar tree and co, until I met my wife, who shops there frequently.

Like any other store, there are certain things that you should get elsewhere. However, I was genuinely impressed that the quality of many things was quite a bit higher than what the stereotype had led me to believe.

Edit: perhaps it is worth pointing out that she also shops Wal-Mart and aldis, and buys only from each of the three stores what the better deals are.

MeinBlutIstBlau• 5 years ago

These dollar stores are located in many business districts. Definitely not right on a main street, but within a nearby vicinity (like 1-3 miles). At least they are in my state. Dollar stores are never farther away than 10 miles max.

riffic• 5 years ago

Daiso has a presence throughout Los Angeles, and it is definitely a different animal than your typical dollar store.

Supermancho• 5 years ago

Dollar stores also exist in Canada (Dollarama and Dollar Tree), where my wife and I call them 75cent stores because of the conversion rate.

kaptain2• 5 years ago

It’s expensive to be poor.

Liron• 5 years ago

On the contrary, we should appreciate that every single item in the dollar store is a marvel of modern economies of scale that benefits all customers, poor ones most of all.

Show a modern dollar store to a Soviet Russian in 1989 or anyone from 100 years ago and they’d go nuts.

thenanyu• 5 years ago

You’re never gonna get anywhere with that argument unfortunately. The hedonic treadmill is too quick and everyone you’re responding to grew up taking all of these modern miracles for granted. I remember what buying snacks was like growing up in China in the early 90s.

You brought your own rice and a dude on the side of the road would pop it for you in a lead pipe.

We shopped at dollar stores after landing in the US and it was mind boggling.

timbit42• 5 years ago

Not with the inflation since 100 years ago.

kaptain2• 5 years ago

That's not my point. Yes, someone poor benefits greatly from a dollar store, but they're paying a premium that someone that is more wealthy does not pay because the wealthy person can take advantage of economies of scale: a wealthy person can buy 100 rolls of toilet paper for $50 where a poor person can only buy one roll for $1.

This extends beyond just the dollar store. A wealthy person has access to a vehicle which allows them to go to Costco that is 10 km away. A wealthy person has storage in their home to house the discounted goods they buy. A wealthy person has access to financing and financial investments that a poor person does not; you cannot buy a portion of share of stock.

atlanta90210• 5 years ago

Family Dollar operates a store near me in Atlanta. Their parking lot is so filthy sometimes the neighbors organize to go clean it up.

It appears to me Family Dollar hates their customers given the food choices, the attitude of the employees and how they maintain their property. I avoid them all.

PopePompus• 5 years ago

I've been struck by how ugly some stores catering to the poor are. Not ugly because they are cheaply decorated, but intentionally ugly, using things like black on yellow coloring for signage, etc. I guess it's eye-catching, but not in a good way.

Scoundreller2• 5 years ago

Or maybe to signal "yeah, we can afford to shop here"?

Like, my dentist's office is really nice. Not just clean, but very nice. I seem to be the only one in our family that realizes that we're the ones that paid for that. Better than charging the same amount for a dumpy office, but makes me wonder how much we've been overpaying.

Even a fancy restaurant will follow the 5second rule in the kitchen, but it will be a nicer floor they're picking it off of. (I never understood granite countertops... they're porous! The last thing you'd want in a kitchen).

mkr-hn4• 5 years ago

A dollar store owner explained it to me more or less as: they're the last stop before the dump. It's like how bill collectors will buy up debt a company has given up collecting themselves for pennies on the dollar.

s5300• 5 years ago

Ahh. Does this mean that the meat that can be found in some dollar stores finds its way there as it's last stop before becoming animal meal?

Does not surprise me one bit.

mkr-hn4• 5 years ago

I think grocery store throw-aways are on a different supply chain. There are stores that sell the old bread from grocery stores. I assume there are stores for meat that's still good but past what the grocery stores stock.

jffry• 5 years ago

Why is this "article" a bunch of images of text with charts interspersed?

gumby• 5 years ago

The article itself is quite interesting: short, simple sentences and many colorful graphics. It looks like it could be from a middle school textbook. But the content itself is not simplistic.

Is it intended for a segment in which this is common?

death_syn• 5 years ago

When the pandemic hit, I switched my shopping almost exclusively to Dollar General, because despite the slightly higher prices compared to Walmart (sometimes) and Aldi (almost always), the number of customers in the store was always pretty light at any one time. I did still have to go to one of those places for things I couldn't get there (premium cheeses, premium meats). But, that became a once a month outing at most versus my weekly shopping trip, which turned from 20-30 minutes to 10 minutes in total, with less exposure to other humans. I honestly believe the Dollar General may have saved my health as far as COVID exposure risk goes.

brudgers• 5 years ago

To know me is to know I am cheap. All dollar stores are not equal.

Everything in DollarTree is $1.00. That's not the case with the other two big chains. Not by a long shot.

A few weeks ago I was thinking about DollarTree economics as I drove down the Susquehanna Valley.

Seems like it collects pretty valuable data about consumer preference and demand in the absence of differential pricing. Campbells condensed Chicken Noodle or Tomato? One eight inch chef's knife or one six inch knife or two four inch knifes?

When I buy a knife and a can of soup and three picture frames, that combination is informative for merchandising a Kroger or a Walmart. There's a long play there.

Particularly because I might use a credit card.

Dollar General and Family Dollar are traditional retailers with no aversion to gouging the locals. They are slightly larger gas station convenience stores without the environmental problems of gas tanks and the real-estate expenses of space for pumps and busy corner locations.

Noos• 5 years ago

The article sort of conflates two different models. Dollar Tree is actual "everything in the store is a dollar" while Dollar General and Family General are mostly small retail stores that sell things at a variety of prices. They round prices to the dollar, but otherwise are traditional retail that just locates in unusual locations.

Five Below is another "dollar store" in that blend, focusing mostly on goods for young adults and teens. Originally everything was below $5, up to and including some video games and electronics like computer accessories or even drones.

It isn't too new of a niche, closeout retailers have often existed and its not uncommon with small businesses; ocean state job lot in the NE kind of exists with this model. I think what is unique is the small retail store model; dollar generals are as big as a walgreens or CVS, but stock a pretty full assortment of goods for the size. They are pretty impressive for being micro-super walmarts in a sense.

Dollar tree's are interesting because you can actually find books and dvd/blu-ray there. It's sort of a commentary on how tough it must be to be a creative when I can buy remnant books from A list authors sometimes; I've seen Jonathan Franzen, John Scalzi, Bill Mckibben, And Rod Dreher books end up in the dollar bin. There's also a staggering amount of generic animated dvds in the pixar/disney mode.

bradleyjg6• 5 years ago

Paperback books that don’t sell are discarded so as not to compete with long tail purchases but hard cover books are expensive enough in terms of production and distribution that the end up getting discounted instead.

b3morales• 5 years ago

Can you expand on this? Do you mean a paperback copy of a book somehow competes with a later sale of the same book?

laurencerowe2• 5 years ago

That's definitely not true for all paperback books. I often buy remaindered paperbacks at Dog Eared and Alley Cat bookshops in San Francisco. You can tell they're remaindered because they're marked with felt tip.

When I lived in the UK, Fopp was a great source for them (along with discount films and music.)

adventured• 5 years ago

It isn't too new of a niche

Definitely an old retail segment. Walmart's origins derive from Sam Walton operating a Ben Franklin five-and-dime variety store (a wholesaler dating to the 19th century), which was that era's equivalent of a Dollar General store (including having spread itself to 2500 locations all over the place). With him later opening Walton's five-and-dime store.

Interesting representative story on the recent conclusion to that chain:

https://www.mprnews.org/story/2015/10/20/ben-franklin

mherdeg• 5 years ago

Ocean State Job Lot is fun. Also in New England I love the Marden's business model. As far as I can tell from the advertising it really is a family business that's hit its scaling limits at about 15 stores -- when you walk in you see whatever remnant stuff a member of the Marden family thought people would like to buy when they went shopping for remnant inventory. Like they list the names of people who buy this stuff on their web site: https://www.mardens.com/sell-to-us/

They even have a special type of store dedicated to flooring and I feel like this reflects the family structure somehow (like a niece or nephew is really into flooring or something). It's just such interesting retail.

jsz0• 5 years ago

One thing I really like about Ocean State Job Lot is they have a couple isles of really cheap fun timeless kids toys that I remember playing with as a kid. I think for a lot of lower income families it's probably one of the only times a kid gets the thrill of walking into a store and selecting new toys to buy.

tshaddox2• 5 years ago

I remember Dollar General carrying cheap/generic brands growing up, but when I went to one last year it seemed indistinguishable in selection and pricing to a Walmart or similar large chain grocery store.

RandomThrow321• 5 years ago

The article calls out the difference between Dollar Tree (everything is a dollar) and Dollar General (low prices but not necessarily a dollar) in one of the images.

wyldfire• 5 years ago

It's sort of a commentary on how tough it must be to be a creative when I can buy remnant books from A list authors sometimes; I've seen Jonathan Franzen, John Scalzi, Bill Mckibben, And Rod Dreher books end up in the dollar bin.

Talented authors who drove retail bookstores to stock their inventory. But when some of it didn't sell, the dollar stores snapped it up for nearly nothing. IMO that's not a slight to the authors. It's to their credit that the bookstores saw their promise based on existing sales at the time.

jjice• 5 years ago

I personally always considered the "general" stores, and considered Dollar Tree the main "dollar" store out of the bunch. I think these stores are super interesting though, because, growing up in a town with a Walmart and Target, there was no reason for me to go to a Dollar General. However, when my friends and I would go camping, the only store for miles and miles would be a Dollar General, and it was relatively booming. The stores aren't bad by any means, but limited and a bit more costly, but I get an odd feeling of coziness if they're the only real store in town.

dukeofdoom• 5 years ago

Dollarama is by far the best one. Super popular in Canada. Things are around the $4 mark. Surprising good enough quality for some things. Clean and well organized store.

wenc• 5 years ago

When I was younger, every single Dollarama item was priced at exactly $1 before tax (prices inched up to $2 for some products a decade after, but the majority of items were still priced at $1). On average, the quality of most items ranged between passable and decent. Most university students I knew bought household items from Dollarama and for the most part it would be fine. I find that Dollarama is just more mainstream in Canada than dollar stores are in the U.S. You would find Dollaramas in mall basements and other medium rent places.

The key was to have some idea of the quality floor of the product one was buying. Winter mittens for example. Unless you really try, it's hard to make winter mittens that suck -- there's just not that many ways to go wrong. I still have mine from a decade ago and they're fine. I still wear mine in the winter.

sabujp• 5 years ago

ahh dollar tree, where we go for birthday party favors for little kids

jessedrain• 5 years ago

I think the article oversighted that even dollar general has loss leader products. When I was a poor student, I remember practically living on $2 worth of 5-10 bananas and a gallon of milk everyday, it was the cheapest in my town and I looked.

You can be poor and still have a fair, unexploitative shopping experience at those stores.

notsureaboutpg• 5 years ago

Well, you can only have that experience because someone else is having an unfair, exploitative experience at the same store...

hn_throwaway_99• 5 years ago

So if I can summarize the article, the economics of dollar stores are "sell things for more than it cost to buy them".

I mean, it seemed like the article wanted to have some nefarious take, but offering smaller quantities of items so people can afford them, even if the per-unit cost is higher, doesn't seem like some unexpected malicious intent. I mean, I certainly expect to pay more per gram if I'm buying a travel size of toothpaste vs. the 4 megatube family pack at Costco.

And the fact that the stores are oriented so the popular items are in the back - just like literally every grocery store in the country - is also unsurprising.

krm01• 5 years ago

I too was under the impression that there was some kind of clever way these shops operate, based on the title. But the economics are exactly like any other shop.

ghayes• 5 years ago

There’s a good Planet Money on this from NPR. They imply that the real profit is from not stocking fresh goods and other items that 1) spoil, 2) have lower margins and 3) require employees to constantly restock. So they basically sell high-margin goods (negotiated in bulk) with absolute minimum costs. That’s it.

[0] https://www.npr.org/sections/money/2019/04/26/717665452/epis...

myself2482• 5 years ago

I haven't RTFA, but it's always struck me as funny that some of the items at the dollar store are 49¢ at the big box. Stuff like hose clamps comes to mind. You can get quite ripped off if you let yourself think "dollar = cheaper than everywhere else".

amelius• 5 years ago

Yeah, but the article provides relevant numbers.

rootusrootus• 5 years ago

I think it's useful information, even if it should be intuitive. I know a number of people who shop at the dollar store because they believe they're saving money. In particular I think it's nice to shed some light on the special arrangements the stores make with manufacturers to produce products that look like the equivalent of what you get in a normal store but only cost a dollar, while in fact containing so little of the actual product that they're a worse deal.

tialaramex• 5 years ago

Pound Shops, a similar idea in the UK, seem to have several different economic strategies in every store.

In some cases they are selling (for £1) a product that your supermarket pays 70p for and sometimes sells for £1.50 and other times "discounts" to 75p. If you bought it from the Pound Shop when it's £1.50 at a supermarket that seems like a bargain, if it was 75p at the supermarket it seems like a rip off. But it's the same product either way.

In some cases as you described they have a 300g version of a 450g product, theirs costs £1 and the "ordinary" version is £1.40 from many retailers. So they are more expensive on a "per-unit" basis. But let's face it, you were going to eat the entire product even though the manufacturer says it's for "sharing", so maybe they did you a favour.

In some cases the manufacturer is engaged in simple price discrimination. The pound store has the exact same quantity of the branded product, but it's wrapped with a label explaining that it only cost £1 whereas the version in the supermarket is unlabelled and costs £1.50. The manufacturer guesses that many people who can afford £1.50 will choose not to visit a Pound Shop, so any sales at the lower price are extra sales and don't cannibalise supermarket sales.

In some cases they're End of Line goods. The supermarket doesn't want to stock a product with a finite supply, especially out of season - it looks desperate, but a Pound Shop can put boxes of "Santa Shapes" candy on shelves in January for £1 (original RRP £2.50) and customers will buy them because candy is candy, who cares if it's Xmas themed when it's so cheap? Or after supermarkets pull the £1.85 "barbecue flavour" chocolate assortment you launched because it doesn't sell, bundle them two for £1 at a Pound Shop and they disappear. Do the Pound Shop's customers eat them? Who cares.

The final category that's most interesting to me is bulk electronics. If you stock sixteen different adaptors in an electronics shop, they move so slowly you probably have to charge £2.50 or more for them even though they're quite cheap to make. But a Pound Shop can pick one adaptor they think sells (say, USB A to USB C is plausible) buy an entire container of them, put them on shelves for a few weeks at £1 each, and they vanish. Want that USB A to C adaptor a month later? Too bad, now they have a GU10 LED lamp, and a month after that maybe it's a laser pointer. Could I get these products on Amazon any time? Yeah, but either the postage kills the deal, or it's "free" and the price is higher.

mianas• 5 years ago

The 'lower total cost, higher unit cost' problem is one of the reasons I love the way the EU mandates advertising prices. i.e. anything sold needs to have the price you actually pay on it (including VAT/other charges), and the cost per unit. (€/l or €/kg).

This saves me an absurd amount of planning/thinking as I can compare an equivalent cost number whenever I see a substitutable product somewhere. Also saves you from being fooled by your own assumptions, like when the unit cost of the largest cereal box is higher than a smaller one.

failwhaleshark• 5 years ago

Don't even hate on my dollar stores (coworker made a mint on the Dollar Tree IPO... Grr!;)

Okay, good.

There have been numerous agenda (economic? class superiority?) articles about "dollars stores: bad." Somehow that they're racist or responsible for food deserts, poverty, crime, and your grandma yelling at the cleaning lady.

dalbasal• 5 years ago

This is interesting. Well written/compiled. All sorts of things to be interested in.

One noteworthy point is how much frames matter. Adjusting quantity (eg small old spice bottle) instead of price makes a big difference in how things play out. It makes everything different.

Another point is returns to scale. Economies of scale are long known and highly observed. Things like "buying power," oligopsony and such were documented as Wal Mart came up. I think there's more to be said on this. Winner take most is a transformative curve. Where's it heading? Is it even bad that markets are structured this way?

I suspect this oligopoly's biggest long term competitor is AliExpress. As the author notes, the key element is being a good, opportunistic buyer of cheap goods. A lot of things come down to mail/delivery systems. I think we're at a point where actual delivery infrastructure will start to be built. How it's built matters.

WalterBright• 5 years ago

The article mentions they'll have to get creative when inflation makes the dollar worthless, or do a little rebranding.

Motel 6 did the same thing. I remember when the 6 meant six bucks a night. It was a great place to catch some Zs when on a road trip.

My dad said the "Nickle Bar" candy bar's size grew and shrank with the cost of chocolate.

EGreg• 5 years ago

I am shocked that dollar stores exist in 2021 given all the inflation that occurred in the last few decades!

A testament to the world’s supply chains and manufacturing automation :)

mixmastamyk2• 5 years ago

One thing I noticed at our local 99 cent store, and didn’t see mentioned in the thread… cashier wait times. There’s a large number of customers of course and they keep costs down with fewer cashiers. So you are looking at twenty minutes standing in line for your $8 in goods.

I did this a few times and (combined with needing to drive there) and decided it was not really worth the savings from our quick/overpriced markets in walking distance, except in rare circumstances. YMMV.

LegitShady2• 5 years ago

a similar store near me replaced their 2 checkouts with 5 self checkouts, and has one person nearby to help/monitor.

mixmastamyk2• 5 years ago

Funny, because our expensive store did that, but the dollar store may not have the upfront capital for it.

rcpt• 5 years ago

Huh. Was expecting to come away from the article with "like McDonald's, they're basically a REIT" but I guess they make decent profit on that stuff.

streamofdigits• 5 years ago

Dollar stores are fascinating as they are the final piece of the puzzle in the long journey of organizing mass produced consumerist society. This started more than a century ago with the invention of (high end) department stores [0].

The end result is hardly satisfying (or stable): an unstopable stream of plastic pollution, toxic levels of sugar and a reliance on cheap labour in remote lands. All those factors are coming under scrutiny and pressure...

[0] https://en.wikipedia.org/wiki/Wanamaker%27s

MarkusWandel• 5 years ago

The different purchasing power of US$ and CAD$ killed the "everything in the store is a dollar" model in Canada at least a decade ago. But Dollarama, which is so successful that it has pretty much squeezed out the other dollar store chains, has really just established themeselves as the "everything store" below the Walmart tier without any particular price - just low in general. Metal foil cookware, kids' party supplies and certain kinds of candy/sweets (I love their weird brand chocolate bars, particularly the "Island Bar" (Bounty clone) and Duoletta (Kinder Bueno clone). Also if you're out cycling they're a good place to buy things like Gatorade or chocolate bars for a reasonable price in quantity 1.

And sometimes a totally ubiquitous store with a predicatable inventory of crappy-but-adequate stuff can be a real problem solver. For example, hit the road with the small children for the long drive to Grandma's, and half an hour out we find that we have the fruit, but not the knife to cut it with. No problem, next Dollarama is 25 minutes away, we'll just grab a knife there. $2! With sheath. Sure it doesn't stay sharp as long, but it totally did the job.

gotorazor• 5 years ago

Dollarama is everything for $4 CAD or under. They don't advertise this fact, but you won't find an item over $4.

neilv• 5 years ago

Dollar stores do this by going after the stuff nobody else wants: surplus items, discontinued products, and old stock that didn't sell well elsewhere.

My experience with Dollar Tree suggests additional methods:

* Smaller amounts of product in package (like the article mentions elsewhere).

* Substandard product. I've gotten everything from Sunbeam batteries, to name-brand envelopes that were obviously thinner than the same brand I'd bought elsewhere (to the point that my printer wouldn't even feed them), to criminally non-sticky fake "duct tape". I've also seen things that are obviously too small (lower cost to manufacture), like car window shades.

* Packaged food imported from outside the US, even with popular US branding on it.

* Prices in some cases the same or higher than another store nearby (e.g., $1.00 for a can of food available for $0.89 or less, within walking distance).

Before Covid, my favorite thing to buy there was Hefty brand zip-seal plastic bags. (I avoid Dollar Tree for things that go into or on the body, but the bags are fine for purposes like organizing non-ESD small parts, and providing some dirt and moisture protection of things in backpacks.)

xyst• 5 years ago

dollar stores are essentially a predator on the lower to middle class; and marginalized communities. also these stores are notorious for only carrying highly processed items, not exactly the best diet to feed your family on.

also, for those $1 toys they sell I bet the source of manufacture is dubious at best. if the nike sweatshops are bad, I can't imagine the working conditions for a dollar store sweatshop are any better.

spicyramen• 5 years ago

I do use Dollar store to buy stuff that is just pretty much disposable such as Balloons, birthday decorations among others. I can say that food is pretty bad and not healthy. Very similar to Iceland supermarkets here in UK

supernova87a• 5 years ago

In the world where every store is trying to work you for whatever profit can be made, at least a Dollar Store is relatively transparent about what they're selling, and straightforward about it. And offering basics that people can afford.

I tried to find a plastic water spray bottle in Target, Walmart, etc. for spraying water on plants or like while ironing. Every option was a fancy-fied designer spruced up version for $8 looking like it was aimed at the "Real Simple" market. I could've bought a spray bottle full of sink cleaner for $3 and emptied it out for the bottle, and saved money.

At least you can go to the $1 store and find this and not get ripped off under the guise of "style and design for the busy mom" at 10x what it should cost.

baby• 5 years ago

Same for a plunger. Target only sold fancy ones.

mgh2• 5 years ago

The article had good points, but it misses one opportunity for businesses that see value in this model: marketing exposure.

If I were someone who wanted to try a brand and do not want to pay big upfront, I will start here and then buy in bulk later if I am satisfied.

Yes, some established brands sells their leftover inventory (brand impression as a side-benefit), but I have also seen some unknown, generic brands start over at dollar stores and then disappear off-shelf.

My hypothesis is that they either failed, or were testing the market/demand (cheaper shelf space?) before selling to more traditional retailers, but I am not sure this is the case. Need an insider to understand the logistics.

Aside from that, there are some really good deals that gets rid of branding/bs, that adds cost to the product's price - sometimes, without much added value or quality difference.

alexpotato• 5 years ago

A question I have always wanted answered:

If the plural of Attorney General is AttorneyS General, is the plural of Dollar General: DollarS general??

codyogden• 5 years ago

No. “Dollar General” is a trademark/proper noun, not a common noun. When pluralized, trademarks are typically paired with a common, pluralized noun since one is typically referring to the mark’s owner entity. “Dollar General stores” “Dollar General brands”

Common nouns with postpositive adjectives, in US English, have the noun pluralized: attorneys general, sisters-in-law, courts-martial, professors emeritus, accounts receivable.

sunshineforever• 5 years ago

Dollar tree is the only remaining true dollar store. I don't know why people count the others.

squeegmeister• 5 years ago

Today ~34k pepper the US landscape... On average, a new one pops up every 6 hours

The 6 hour thing can't be right, can it?

jdkee• 5 years ago

They do have a downside. See https://www.propublica.org/article/how-dollar-stores-became-...

The economics of dollar stores

Related Stories