Table of Contents
Things you never knew about dollar stores
Dollar Stores Aren’t Always Cheaper
Some Items May Cost More Than $1
Products Might Be Cheaper Because They’re Smaller
You Can Find Name Brands — But They’re Not Always a Bargain
It doesn’t help your budget if you grab a name-brand detergent or soap at a dollar store that is smaller than what you’d buy at a discount or grocery store, which may negatively impact your savings. However, if you like specific cleaning products or bathroom supplies, you can find them here.
Related: 20 Store-Brand Products with Cult Followings
They’re Cutting Costs — But Still Want You to Spend More
Unfortunately, these stores aren’t passing the savings onto consumers. Dollar General has said that it wants to make its more than 31% gross margin even bigger. It’s making stores smaller to prevent shoplifting, using anti-theft tags on all items, managing and expanding its own fleet of trucks, expanding its generic product line, and sourcing from places cheaper than China. While most goods will remain below $5, they’re looking to encourage impulse buying on goods with higher price points.
Dollar Stores Bet Against You
The loss of the middle class may have helped dollar stores, but financial analyst say those chains will need things to get worse if they really want to thrive. “What the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America,” Garrick Brown, director for retail research at the commercial real estate company Cushman & Wakefield, told Bloomberg. “It’s based on the concept that the jobs went away, and the jobs are never coming back, and that things aren’t going to get better in any of these places.”
They Feed Off of Misery
It’s been noted before that the upswing in Americans on food stamps and the continued struggles of millennials after the recession have helped dollar stores find footing. But with Pew Research noting that just 50% of U.S. wealth is held by middle-income households — compared to 61% in 1973 — a rash of retail closings and the decline of malls in middle-class areas have swept more people toward dollar stores.
They Have a Type of Shopper in Mind …
In December of 2017, Dollar General CEO Todd Vasos told a Goldman Sachs retailing conference that his stores’ average shopper is, typically, a woman living a two-income household, making $40,000 per year before taxes, and clinging to a stable job with no wage growth. He says that shopper’s disposable income is around 2%, so $800 per year, and her shopping habits don’t respond well to price changes of as little as a dime.
… And They Actively Seek Out That Type
As CityLab noted, dollar stores tend to flourish in areas where residents are making below the median income and living at high rates of poverty. They also tend to pop up in areas where residents have lower levels of education, higher rates of smoking and obesity. Dollar stores are also more common in communities with higher crime rates.
Even Well-Off Shoppers Hunt for Bargains at Dollar Stores
There Are More Dollar Stores Than Walmarts and Costcos
The two biggest dollar chains, Dollar Tree and Dollar General, have more stores combined than the six biggest U.S. retailers — Walmart, Kroger, Costco, Home Depot, CVS and Walgreens — put together, according to Forbes. If you put Macy’s, Kohl’s, Nordstrom, JCPenney, Dillard’s, Saks/Lord & Taylor, Neiman Marcus, and Belk together, they’d be less than 15% of the total number of dollar stores.
The Stores Can Get Messy
Walking into a dollar store in disarray, isn’t a rarity, but that’s by design. These stores run on minimal staff and they’re built to move a lot of product quickly. If that product has to sit on floors or in boxes for a bit while a cashier handles the register, so be it.
Wages Are Low at Most Dollar Stores
According to Glassdoor, the average cashier makes $9 an hour or less than $18,000 a year. Store managers and assistant managers make between $43,000 and $48,000 a year, while district managers can make over $75,000. If you’re stocking shelves, it’s $8 to $9 an hour. Dollar General wages fall along the same lines.
Employees Are Often Required to Multi-Task
If you’re a cashier at a dollar store, chances are you’re also its janitor and security as well. Dollar stores go light on employee presence to keep their overhead low and to keep their profit margins high.
It’s a Two-Horse Race …
Dollar Tree (which also owns Family Dollar) has over 15,000 locations and amassed $22.82 billion in revenue last year. Its chief competitor, Dollar General, has nearly 16,000 locations and made more than $27.8 billion. By comparison, a second-tier competitor like Five Below has only 900 locations.
… But There Are Plenty of Little Guys
Aside from Five Below, there are chains as large as the nearly 400-store 99 Cents Only based out of California. However, most dollar store chains are much smaller.
They’re Pressuring Competitors Big and Small
Their Numbers Are Growing
The number of dollar stores in the U.S. hit 30,000 in 2016. That’s 25 percent higher than it was in 2011 and will likely grow to nearly 38,000 by 2021 if growth isn’t derailed by the coronavirus pandemic.
They Tend to Cluster
Even Dollar Stores Struggle to Keep up With Amazon
Their numbers are growing, but dollar stores face the same struggles as many other retail stores in the current environment. Dollar Tree and Dollar General are benefiting from a shrinking middle class that is drifting into lower tiers, but they’re also pressured by online marketplaces like Amazon. Even with their great deals, dollar stores feel the same pinch as other retailers when the economy softens.
Wholesalers and Direct Suppliers Save Them Money
They Make Many Dollars
Last year, Dollar Tree and Dollar General alone made nearly $50 billion in revenue. That’s twice as much as Macy’s, but only about half that of Kroger.
They’re a Bulk Store in Reverse
They’re picking up items in bulk and benefiting from the economics of scale, but dollar stores aren’t always passing the bulk of those deals onto the consumer. That’s evident from Dollar Tree’s Direct to Business program, which lets businesses and charitable organizations pick up items at bulk prices, but doesn’t charge them a warehouse fee like Costco or Sam’s Club for the privilege. Meanwhile, they can break up cases and sell items for $1 in stores whether or not that’s their unit price in bulk.
They Don’t Franchise
All Dollar Tree and Family Dollar stores are operated from their corporate headquarters in Virginia. Dollar General doesn’t franchise either, but will let you sell Dollar General products online as an “affiliate” for a 5% commission.
They’re High Margin
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