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The economics of dollar stores

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Re: The economics of dollar stores

#111

Post by kergonath »

lotsofpulp wrote: post #83
mrfusion wrote: post #58

Earlier quoted context omitted.

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

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.

That’s why I prefer wood ones. I can’t say I ever bought one at a pound store, but even a basic one for £5 lasts years.

Re: The economics of dollar stores

#112

Post by the_lonely_road »

wombatmobile wrote: post #25
voisin wrote: post #7

Earlier quoted context omitted.

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.

That's called a loss-leader strategy. It's the same strategy fishermen use when they invest a small amount of money at the bait store before a fishing trip. As you said, it's a lure. The strategy is not exclusive to dollar stores. > Like other retailers, a dollar store's interior layout is set up so that commonly purchased staples like cleaning supplies and milk are in the back of the store. This requires shoppers to…

I disagree with your characterization of this being non-independence of thought.

You don’t know what you don’t know. It’s not on your list because you didn’t want it when you went to the store. You saw it, and now you know about it, and now you want it, so you buy it.

I never understand people who try to make this seem nefarious. You walk past 10,000 things you didn’t think about and don’t want so you just walk past it without picking it up. There obviously some small exceptions, like filling the checkout lane with candy because they know kids are going to harass the parents, but in general it’s about the first strategy. Show people things they want that they didn’t know they wanted when they walked in so they will spend more money in your store.

Re: The economics of dollar stores

#113

Post by celticninja »

lotsofpulp wrote: post #75
celticninja wrote: post #39

Earlier quoted context omitted.

I don't think a brand will change their recipe or reduce quality of components, when simply resizing is easier. If they wanted to do that then they would be better off creating a different lower cost brand, rather than a new manufacturing process for $ store items.

Brands will offer a cheaper quality product with a slightly different model number in electronics though.

Worth it on higher end stuff not on $ store items.

Re: The economics of dollar stores

#114

Post by Spooky23 »

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

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.

Re: The economics of dollar stores

#115

Post by zdragnar »

wirthjason wrote: post #84
Clewza313 wrote: post #32

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 distri…

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 reasona…

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.

Re: The economics of dollar stores

#116

Post by dalbasal »

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.

Re: The economics of dollar stores

#117

Post by amelius »

hn_throwaway_99 wrote: post #101

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 si…

Yeah, but the article provides relevant numbers.

Re: The economics of dollar stores

#118

Post by b3morales »

bradleyjg wrote: post #87
Noos wrote: post #81

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…

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.

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

Re: The economics of dollar stores

#119

Post by echelon »

b3morales wrote: post #118
bradleyjg wrote: post #87

Earlier quoted context omitted.

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.

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

Supply and demand. If you decrease the supply, the small existing demand will pay more.

Re: The economics of dollar stores

#120

Post by WalterBright »

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.

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