26 Things You Didn’t Know About Dollar Stores
Rising food prices and pandemic job loss were disasters for many people and companies last year — but not so dollar stores. The largest dollar chain, Dollar General, saw a 32% increase in foot traffic, according to The Washington Post. But people in need of bargains may not always find them (we found some items you definitely shouldn’t buy at a dollar store). We did some digging to find out the secrets of dollar stores and why they’ve become such a large part of the U.S. consumer landscape — not to mention one of the biggest retail winners of the pandemic. (That started with being allowed to stay open as “essential” at a time other stores were shut down.)
Related: 24 Weirdest Things We Found at the Dollar Store
Dollar Stores aren’t the best place to find healthy foods — and may not offer fresh fruits and vegetables at all. Given that dollar stores tend to force out traditional grocery stores (which operate on slimmer margins), that means many people who don’t have the money or time to travel beyond their immediate area have no choice but to buy the ultra-processed choices at their local dollar store. To battle the “food deserts” of low-quality food created by these stores, Oklahoma City’s Ward 7 is now requiring new discount stores in the area either have an on-site pharmacy or at least 500 square feet dedicated fresh veggies, fruit, and meat.
Related: The 20 Least Unhealthy Junk Foods
You still have to shop around. We compared dollar store prices to Walmart prices, and how well a shopper does depends on how closely they check the unit price. Sometimes, a dollar gets you less at Dollar Tree than it would somewhere else.
Related: 16 Best Things to Buy at the Dollar Store
If you see “dollar” in the name, don’t expect everything to cost a dollar. While Dollar Tree keeps all of their items at a dollar or below, Dollar General, 99 Cents Only, and Dollar-Tree-owned Family Dollar stores offer goods at multiple price points.
Related: 18 Things to Avoid at the Dollar Store
Sometimes it’s more important to keep a product at the $1 price mark, even if that means shrinking the size of the container of toothpaste, shaving cream or other item the quantity of what you’re selling, according to Clark Howard. We noticed shrinking containers when comparing Walmart to dollar stores, too. As inflation goes up, expect items to get even smaller.
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It doesn’t help your budget if you grab a name-brand detergent or soap at a dollar store that is smaller than what you’d buy at a discount or grocery store, which may undo your savings. But if you like specific cleaning products or bathroom supplies, you can find them here.
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Unfortunately, these stores aren’t passing the savings onto consumers. Dollar General has said that it wants to make its more than 30% gross margin even bigger. It’s making stores smaller to prevent shoplifting, using anti-theft tags on all items, managing and expanding its own fleet of trucks, expanding its generic product line, and sourcing from places cheaper than China. While most goods will remain below $5, they’re looking to encourage impulse buying on goods with higher price points.
Related: 11 Sneaky Ways Online Retailers Get You to Spend More
The loss of the middle class may have helped dollar stores, but financial analyst say those chains will need things to get worse if they really want to thrive. “What the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America,” Garrick Brown, director for retail research at the commercial real estate company Cushman & Wakefield, told Bloomberg. “It’s based on the concept that the jobs went away, and the jobs are never coming back, and that things aren’t going to get better in any of these places.”
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It’s been noted before that the upswing in Americans on food stamps and the continued struggles of millennials after the recession — issues that have worsened during the pandemic — have helped dollar stores find footing. But with Pew Research noting that just 50% of U.S. wealth is held by middle-income households — compared with 61% in 1973 — a rash of retail closings and the decline of malls in middle-class areas have swept more people toward dollar stores. This year 1,650 dollar stores are expected to open. According to Coresight Research, that’s nearly half of all new national retail openings.
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In December 2017, Dollar General CEO Todd Vasos told a Goldman Sachs retailing conference that his stores’ average shopper is, typically, a woman living a two-income household, making $40,000 per year before taxes, and clinging to a stable job with no wage growth. He says that shopper’s disposable income is around 2%, so $800 per year, and her shopping habits don’t respond well to price changes of as little as a dime.
Related: 35 Bulk Buys That Are Cheaper at the Dollar Store Than Costco
As CityLab noted, dollar stores tend to flourish in areas where residents are making below the median income and living at high rates of poverty. They also tend to pop up in areas where residents have lower levels of education, higher rates of smoking and obesity. Dollar stores are also more common in communities with higher crime rates.
Related: Where Has SNAP Use Increased the Most Amid the Pandemic?
A few years back, The New York Times Magazine discovered that about 22% of dollar store shoppers make more than $70,000 a year. They’re also the fastest-growing segment of shoppers for the stores, along with millennials.
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The two biggest dollar chains, Dollar Tree and Dollar General, have more stores combined than the six biggest U.S. retailers — Walmart, Kroger, Costco, Home Depot, CVS and Walgreens — put together, according to Forbes. If you put Macy’s, Kohl’s, Nordstrom, JCPenney, Dillard’s, Saks/Lord & Taylor, Neiman Marcus, and Belk together, they’d be less than 15% of the total number of dollar stores.
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Walking into a dollar store in disarray isn’t a rarity, but that’s by design. These stores run on minimal staff and they’re built to move a lot of product quickly. If that product has to sit on floors or in boxes for a bit while a cashier handles the register, so be it.
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According to Glassdoor, the average cashier makes $9 an hour or less than $18,000 a year. Store managers and assistant managers make between $46,000 and $48,000 a year, while district managers can make over $81,900. If you’re stocking shelves, it’s $10 an hour. Dollar General wages fall along the same lines.
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If you’re a cashier at a dollar store, chances are you’re also its janitor and security as well. Dollar stores go light on employee presence to keep their overhead low and to keep their profit margins high.
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Dollar Tree (which also owns Family Dollar) has more than 15,200 locations and amassed $22.3 billion in revenue last year. Its chief competitor, Dollar General, has more than 17,000 locations and made more than $33.8 billion — an increase of 22% over the previous year. By comparison, a second-tier competitor such as Five Below has just over 1.000 locations.
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Aside from Five Below, there are chains as large as the over 390-store 99 Cents Only based out of California. Most dollar store chains are much smaller, though.
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The growth of Dollar Tree, Dollar General, and the other large chains has come at the expense of not only upmarket competitors, but smaller dollar stores. As the New York Times pointed out, dollar-store chains have done a fine job of pushing mom-and-pop operations out of the business through their presence and their supply chains.
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The number of dollar stores in the United States hit 30,000 in 2016. That’s 25% higher than it was in 2011 — and the number hit 34,215 last year.
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While dollar stores have proliferated across the country, the folks at CityLab point out that “they are concentrated in blue-collar, working-class states.” The highest concentrations are found in Ohio and Indiana to the north, down through Kentucky and Tennessee through the South and into the Gulf states. Notably, cities including New Orleans, Tulsa, Mesquite, Texas, and Birmingham, Alabama has passed legislation to block proposed dollar stores from opening within one or two miles of existing ones.
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Their numbers are growing, but dollar stores face the same struggles as many other retail stores in the current environment. Dollar Tree and Dollar General benefit from a shrinking middle class that is drifting into lower tiers, but they’re also pressured by online marketplaces such as Amazon. Even with their great deals, dollar stores feel the same pinch as other retailers when the economy softens.
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Independent dollar stores and small chains depend heavily on wholesalers with access to overproduced products or inexpensive imports. But some of the larger chains have their own suppliers in place and deal with name-brand clients directly.
Related: 25 Dorm Room Essentials to Buy at the Dollar Store
Last year, Dollar Tree and Dollar General alone made more than $56 billion in revenue. That’s more than three times what Macy’s made, but not even half of what Kroger brought in.
Related: 18 Secrets for Shopping at Kroger
They’re picking up items in bulk and benefiting from the economics of scale, but dollar stores aren’t always passing the bulk of those deals onto the consumer. That’s evident from Dollar Tree’s Direct to Business program, which lets businesses and charitable organizations pick up items at bulk prices, but doesn’t charge them a warehouse fee like Costco or Sam’s Club for the privilege. Meanwhile, they can break up cases and sell items for $1 in stores whether or not that’s their unit price in bulk.
Related: 20 Things You Probably Didn’t Know About Costco
All Dollar Tree and Family Dollar stores are operated from their corporate headquarters in Virginia. Dollar General doesn’t franchise either, but will let you sell Dollar General products online as an “affiliate” for a 5% commission.
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Dollar stores maintain huge gross margins — larger than discount or supermarket chains — and actually make more money on every item they sell than their competitors. By selling smaller sizes and cheaper goods for a higher unit price, dollar stores are taking in more from consumers by parsing the pain into bite-sized chunks.
Related: 13 Things That Are Cheaper at Aldi Than the Dollar Store
