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The economics of dollar stores

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Re: The economics of dollar stores

#191

Post by Falling3 »

gambiting wrote: post #22
kcorbitt wrote: post #17

Earlier quoted context omitted.

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…

>>That's sometimes merited (payday loans!) That's also a very interesting discussion to have because from what I understand, payday loans businesses exist because the alternative is worse - people who are desperate will always borrow money from someone, so it's better that they borrow from a well regulated business rather than from the "pay or we'll break your legs" kind. And then the 1000% APR is argued that it's th…

> And then the 1000% APR is argued that it's the actual cost of risk with these loans since they default so often.

Isn't that a bit of a self-fulfilling prophecy?

Re: The economics of dollar stores

#192

Post by justnotworthit »

equality_1138 wrote: post #187
grae_QED wrote: post #148

Earlier quoted context omitted.

[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.

> "Snap up these items...using their power to strongarm the price down" Strongarm?

> "Count on customers ... not doing the math" with a quote that "admits" this, but not exactly. Messy way to explain it.

> "Center their entire business modal around this dependency" > Maps of low income areas

Meh. Any one of those (cept maybe strongarm) by themselves isn't remarkable. Together, it's reasonable to wonder about anti-capitalism (exploit the poor?) undertones, if you're senstive to that kind of thing. Calling that reaction a "knee-jerk sensationalist review" seems over-the-top to me.

Re: The economics of dollar stores

#193

Post by jhallenworld »

jsz0 wrote: post #183
mherdeg wrote: post #131

Earlier quoted context omitted.

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.

I like their ultra-cheap scientific calculators (their markup is 100% from the Alibaba high volume price, but still cheap) and art supplies. I bought a metal ruler from them once, only to find that it had a misprint on the scale.

Re: The economics of dollar stores

#194

Post by tialaramex »

rootusrootus wrote: post #188
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…

Pound Shops, a similar idea in the UK, seem to have several different economic strategies in every store.

In some cases they are selling (for £1) a product that your supermarket pays 70p for and sometimes sells for £1.50 and other times "discounts" to 75p. If you bought it from the Pound Shop when it's £1.50 at a supermarket that seems like a bargain, if it was 75p at the supermarket it seems like a rip off. But it's the same product either way.

In some cases as you described they have a 300g version of a 450g product, theirs costs £1 and the "ordinary" version is £1.40 from many retailers. So they are more expensive on a "per-unit" basis. But let's face it, you were going to eat the entire product even though the manufacturer says it's for "sharing", so maybe they did you a favour.

In some cases the manufacturer is engaged in simple price discrimination. The pound store has the exact same quantity of the branded product, but it's wrapped with a label explaining that it only cost £1 whereas the version in the supermarket is unlabelled and costs £1.50. The manufacturer guesses that many people who can afford £1.50 will choose not to visit a Pound Shop, so any sales at the lower price are extra sales and don't cannibalise supermarket sales.

In some cases they're End of Line goods. The supermarket doesn't want to stock a product with a finite supply, especially out of season - it looks desperate, but a Pound Shop can put boxes of "Santa Shapes" candy on shelves in January for £1 (original RRP £2.50) and customers will buy them because candy is candy, who cares if it's Xmas themed when it's so cheap? Or after supermarkets pull the £1.85 "barbecue flavour" chocolate assortment you launched because it doesn't sell, bundle them two for £1 at a Pound Shop and they disappear. Do the Pound Shop's customers eat them? Who cares.

The final category that's most interesting to me is bulk electronics. If you stock sixteen different adaptors in an electronics shop, they move so slowly you probably have to charge £2.50 or more for them even though they're quite cheap to make. But a Pound Shop can pick one adaptor they think sells (say, USB A to USB C is plausible) buy an entire container of them, put them on shelves for a few weeks at £1 each, and they vanish. Want that USB A to C adaptor a month later? Too bad, now they have a GU10 LED lamp, and a month after that maybe it's a laser pointer. Could I get these products on Amazon any time? Yeah, but either the postage kills the deal, or it's "free" and the price is higher.

Re: The economics of dollar stores

#195

Post by new299 »

tkgally wrote: post #66
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…

Daiso, the largest chain in Japan, designs a lot of their own products, and the shear variety of some product lines is one of the stores’ attractions. Twenty years ago, before going back to the U.S. from Japan for a family reunion, I bought fifty folding fans, each with a different Japanesey design, at Daiso as gifts. The relatives I handed them out to seemed delighted, and they cost me only a buck apiece. Until I st…

Right, and it appears to be a completely different model than that presented in the article.

What’s interesting is that a significant fraction of the products at Daiso are made in Japan. Not by any means the majority, but a lot of the simple injection modeled products (containers), some of the ceramic plates and bowls, some of the chopsticks.

It’s pretty shocking to me that they can make these products domestically and sell them for ~$1. But I suspect for simple products the economics of making these items locally still makes sense, when compared with shipping a bulky object which is largely air.

Re: The economics of dollar stores

#196

Post by IncRnd »

taftster wrote: post #182
IncRnd wrote: post #127

Earlier quoted context omitted.

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?

I meant the second. I can't say that happens in all cases, but I've specifically checked this for some food items at Dollar Tree, and the ingredient lists differed in those cases.

It was about two years ago when I checked. I noticed an item in the refrigerated section at Dollar Tree, where the item was $1, yet I had just purchased the same item at the grocery for more money. I purchased the item at Dollar Tree and compared the ingredients.

Then I checked one other item, as it occurred to me. It was idle curiousity more than anything else. I know there much be some difference between the item at a dollar store and the item at a non-dollar store, either expiration, item size, item ingredients, or something else.

Re: The economics of dollar stores

#197

Post by timbit42 »

Liron wrote: post #90
kaptain wrote: post #35

It’s expensive to be poor.

On the contrary, we should appreciate that every single item in the dollar store is a marvel of modern economies of scale that benefits all customers, poor ones most of all. Show a modern dollar store to a Soviet Russian in 1989 or anyone from 100 years ago and they’d go nuts.

Not with the inflation since 100 years ago.

Re: The economics of dollar stores

#198

Post by axiolite »

mrfusion wrote: post #58
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…

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

I had a friend who bought a $1 spatula. He's dead now.

Re: The economics of dollar stores

#199

Post by axiolite »

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…

Travel supplies are the big draw for me.

Most stores charge about as much for a mini tube of toothpaste (or mouth wash, whatever) as a full-sized, name brand mega sized one. Dollar Tree will usually sell you a multi-pack of minis for $1, cheaper than the bulk purchase. AND the more expensive will usually have ANTI-features like a flip-top instead of basic screw-on lid... No thanks, I prefer the toothpaste to stay in the tube, I'm not buying it to repaint the interior of my bag...

Toothbrush at Walgreens: $3

Toothbrush at a gas station: $8

Toothbrush at Dollar Tree: 4 for $1

They also have the added advantage of often being conveniently located. Little store around the corner, instead of fighting through traffic, going miles to the central big-box retailer everyone does their big shopping trips at.

Re: The economics of dollar stores

#200

Post by equality_1138 »

justnotworthit wrote: post #192
equality_1138 wrote: post #187

Earlier quoted context omitted.

> 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.

> "Snap up these items...using their power to strongarm the price down" Strongarm? > "Count on customers ... not doing the math" with a quote that "admits" this, but not exactly. Messy way to explain it. > "Center their entire business modal around this dependency" > Maps of low income areas Meh. Any one of those (cept maybe strongarm) by themselves isn't remarkable. Together, it's reasonable to wonder about anti-cap…

Not disagreeing whether the author hints at some bias with these choice of words, but to interpret this as "anti-capitalist" is absolutely over-the-top. In fact it shows a clear lack of understanding about markets.
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