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The economics of dollar stores

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Re: The economics of dollar stores

#181

Post by LegitShady »

mixmastamyk wrote: post #169
LegitShady wrote: post #158

Earlier quoted context omitted.

a similar store near me replaced their 2 checkouts with 5 self checkouts, and has one person nearby to help/monitor.

Funny, because our expensive store did that, but the dollar store may not have the upfront capital for it.

I've seen some super large dollar stores that are making lots of net profit. Just because the items are cheap doesn't mean the net margin is small, because the items are cheap to buy too, and they're chains that buy large quantities often directly from a manufacturer to get the best price they can.

I think it just depends on what the net improvement is. If they had two checkouts before, that each required a person, and they replace it with 5 checkouts that now require just one person, the cost per person-checkout is 20% of what they were paying before. The machines themselves might be leased or otherwise amortized over significant periods giving a cheap cost per year. If lines of people are waiting for checkout that might mean a much improved experience.

Re: The economics of dollar stores

#182

Post by taftster »

IncRnd wrote: post #127
busymom0 wrote: post #14

Earlier quoted context omitted.

> 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.

That's a list of crap food, which might be what was meant. However, if you compare the ingredient list for a seemingly identical item, the ingredients (contents or quantity) will many times differ between a dollar store and elsewhere.

"seemingly identical item" -

Can you give a more specific example of this? Like if it's two different brands of "chicken noodle soup", then I'd assume the ingredient list could/would change.

But are you saying that a can of Campbell's chicken noodle soup in the dollar store is different from the Campbell's can at Walmart? e.g. the same brand ingredients change?

Re: The economics of dollar stores

#183

Post by jsz0 »

mherdeg wrote: post #131
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…

Ocean State Job Lot is fun. Also in New England I love the Marden's business model. As far as I can tell from the advertising it really is a family business that's hit its scaling limits at about 15 stores -- when you walk in you see whatever remnant stuff a member of the Marden family thought people would like to buy when they went shopping for remnant inventory. Like they list the names of people who buy this stuff…

One thing I really like about Ocean State Job Lot is they have a couple isles of really cheap fun timeless kids toys that I remember playing with as a kid. I think for a lot of lower income families it's probably one of the only times a kid gets the thrill of walking into a store and selecting new toys to buy.

Re: The economics of dollar stores

#184

Post by laurencerowe »

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.

That's definitely not true for all paperback books. I often buy remaindered paperbacks at Dog Eared and Alley Cat bookshops in San Francisco. You can tell they're remaindered because they're marked with felt tip.

When I lived in the UK, Fopp was a great source for them (along with discount films and music.)

Re: The economics of dollar stores

#185

Post by wombatmobile »

the_lonely_road wrote: post #112
wombatmobile wrote: post #25

Earlier quoted context omitted.

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…

> You don’t know what you don’t know.

We all know and expect soda, chips, chocolate, and other highly fattening snack foods to be in the store, prominently displayed near checkouts, often advertised at a discount on sale.

> It’s not on your list because you didn’t want it when you went to the store.

Right. That's because in our considered state of mind, we reject those dietary choices as unhealthy. And yet, we end up buying it after we are exposed to retail layouts that are designed by psychologists to maximise the profit of the store owner.

> I never understand people who try to make this seem nefarious.

What would you call it?

Re: The economics of dollar stores

#186

Post by bradleyjg »

laurencerowe wrote: post #184
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.

That's definitely not true for all paperback books. I often buy remaindered paperbacks at Dog Eared and Alley Cat bookshops in San Francisco. You can tell they're remaindered because they're marked with felt tip. When I lived in the UK, Fopp was a great source for them (along with discount films and music.)

My knowledge of the subject goes back to a high school job in a bookstore. Things may well have changed since then. Back then we ripped the covers off mass market paperback and sent them back to the publisher for a credit. The books were supposed to be discarded but you did from time to time come across a paperback book with no cover at a thrift store or similar, so clearly that didn’t always happen.

Re: The economics of dollar stores

#187

Post by equality_1138 »

grae_QED wrote: post #148
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…

[flagged]

> feels like the article has some anti-capitalism undertones...

What a knee-jerk sensationalist review of the article. It makes a fair point about why some consumers like the stores, and others welcome its convenience. Is that some major controversy? In fact much of the article could be taken as positive (pro-capitalistic) review of their strategy, a case study in making lots of money the old fashioned way.

Re: The economics of dollar stores

#188

Post by rootusrootus »

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…

I think it's useful information, even if it should be intuitive. I know a number of people who shop at the dollar store because they believe they're saving money. In particular I think it's nice to shed some light on the special arrangements the stores make with manufacturers to produce products that look like the equivalent of what you get in a normal store but only cost a dollar, while in fact containing so little of the actual product that they're a worse deal.

Re: The economics of dollar stores

#189

Post by mgh2 »

The article had good points, but it misses one opportunity for businesses that see value in this model: marketing exposure.

If I were someone who wanted to try a brand and do not want to pay big upfront, I will start here and then buy in bulk later if I am satisfied.

Yes, some established brands sells their leftover inventory (brand impression as a side-benefit), but I have also seen some unknown, generic brands start over at dollar stores and then disappear off-shelf.

My hypothesis is that they either failed, or were testing the market/demand (cheaper shelf space?) before selling to more traditional retailers, but I am not sure this is the case. Need an insider to understand the logistics.

Aside from that, there are some really good deals that gets rid of branding/bs, that adds cost to the product's price - sometimes, without much added value or quality difference.

Re: The economics of dollar stores

#190

Post by mastax »

bradleyjg wrote: post #54
41209 wrote: post #33

Earlier quoted context omitted.

The worse alternative is sleeping on the streets when you can't pay your rent. While I do think payday loans are evil, I recognize why they exist. I would prefer a much more robust housing support system for lower income people. Almost all of society's problems could be fixed with more affordable housing. For example let's say you have abusive parents, if affordable housing exist the moment you turn 18 you can up and…

> I would prefer a much more robust housing support system for lower income people. Almost all of society's problems could be fixed with more affordable housing. > When I was young I was able to find a $600 apartment, on the free market. Now the same place is 1200$. The issue is that the overwhelming goal of politicians at all levels is to increase the value of individually owned residential units above the rate of g…

California has made huge strides over the past year to legalize housing, so I have some hope that the winds are changing.
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