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How can dollar stores still sell things for a dollar?


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. And I’ve always wondered, 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 much 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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