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The economics of dollar stores

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Re: The economics of dollar stores

#11

Post by dopidopHN »

kcorbitt wrote: post #2

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…

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.

Re: The economics of dollar stores

#13

Post by newsclues »

voisin wrote: post #7
melling wrote: post #5

Earlier quoted context omitted.

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

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.

Or perhaps some Dollar Stores also use liquidation inventory to sell lower than normal prices?

Doubt that crayons are loss leaders.

Re: The economics of dollar stores

#14

Post by busymom0 »

dopidopHN wrote: post #11
kcorbitt wrote: post #2

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…

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.

> 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.

Re: The economics of dollar stores

#15

Post by NikolaNovak »

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.

Re: The economics of dollar stores

#16

Post by middus »

busymom0 wrote: post #14
dopidopHN wrote: post #11

Earlier quoted context omitted.

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.

> 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.

I think that's what was meant with crap

Re: The economics of dollar stores

#17

Post by kcorbitt »

justinjlynn wrote: post #4

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.

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.

Re: The economics of dollar stores

#18

Post by Mountain_Skies »

hytdstd wrote: post #8

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.

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.

Re: The economics of dollar stores

#19

Post by powerapple »

melling wrote: post #5
kcorbitt wrote: post #2

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…

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

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.

Re: The economics of dollar stores

#20

Post by heresie-dabord »

justinjlynn wrote: post #4

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.

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.

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