Not only are dollar stores still around,
since the Great Recession, they've exploded.
This is Josh Kublie from Keesler Air Force base in Mississippi.
The two largest dollar store chains in the country are
Dollar General and Dollar Tree, which also owns Family Dollar.
Together they have more than 27,000 stores
in the continental United States.
And this doesn't even begin to include all the
mom-and-pop shops or the smaller dollar store chains.
So how can dollar stores buck inflation and still turn a profit?
I went to a 99 Cents Only store
in Montebello, California, to find out.
Do you care when people call your stuff cheap?
My favorite thing is when people are walking out with a
basket full of merchandise.
They're like, "This stuff is cheap!"
I'm like, "Come back again and buy more cheap stuff."
Jason Kidd is the senior vice president of operations
for 99 Cents Only, which has nearly 400 stores
across the Western U.S.
A lot of times, it's product that a vendor is trying to unload
somewhere that somebody else didn't buy.
They can bring it to us.
We take all of it, but we take it at a much lower cost
than other retailers would.
Each dollar store has its own tactics to keep prices low,
but in general, they can sell stuff at a cheap price
because of what they sell and where they get it.
Some are famous for selling off-brand stuff,
which they sometimes get made specifically for their stores.
It's like a poop emoji unicorn. Right?
But this was an item we designed.
But they also do sell brand name items,
often in sizes and quantities specifically made for dollar stores.
If we can sell something in 99 Cents that may be
a little smaller pack but it's $4 somewhere else,
it's still a very, very strong value.
Each chain does this differently.
At Dollar Tree, for example,
a two-pack of Irish Spring soap costs a dollar.
At Target, an eight-pack costs $3.99.
But if you look very closely, the bars sold at Dollar Tree —
they're smaller.
So if you do the math,
Irish Spring by the ounce is actually
more expensive at Dollar Tree,
but the smaller quantity gives customers the option
to buy what they need right now.
99 Cents Only focuses on places where there are
lots of people and high-density markets.
But the thing is, we're also seeing explosive growth
in rural areas with smaller populations.
Why?
Well, it's less risky for dollar stores to go
where other retailers won't.
Let's look at Walmart, for example.
It costs the company more than $15 million
to build a Supercenter — $15 million —
so Walmart has to pick areas
with enough potential customers to make money.
Dollar General, on the other hand,
its startup costs can be as little as $250,000,
so you can say the risk is relatively low.
That means dollar stores can go into smaller markets
where you may not find as many grocery stores or retailers.
But maybe one of the most important reasons dollar stores
are able to turn a profit with such cheap merchandise
is becausae
During the Great Recession
when other companies were shutting down,
many dollar stores, they were expanding.
They started carrying more groceries and household essentials,
stealing customers from other retailers.
History will tell you that yes, we did have a spike in sales
when the recession was going on.
For decades, wages have stayed pretty stagnant,
which means the median household income is
roughly at the same level today as it was in the late '90s.
And that's caused the middle class to shrink.
And it's something dollar stores are very aware of.
Here's what the Dollar General's CEO, Todd Vasos,
recently told the Wall Street Journal:
Translation:
Dollar stores are betting big
on a growing and permanent lower class.
They found a way to get to customers
no one else was able to get to.
They sell a ton of cheap stuff at a ton of cheap stores.
And they've built a business model that
capitalizes on economic instability.
So why can dollar stores still afford to sell stuff for a dollar?
Because a lot of us can't afford anything else.
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