My guess is that this is only a small part of their business. Some of these chains, like Dollar Tree or Dollar General, have thousands of stores. The volume of discontinued merchandise is too small to supply all of them, unless they’re willing to have different merchandise at different stores. (But that doesn’t work if they’re putting out a nationwide circular/flyer showing the same merchandise available everywhere.) So my guess is the majority of the merchandise is made to be sold at a one-dollar price point.
(Growing up, there was a local store called “Railroad Salvage” that sold odd merchandise, and I could believe its stuff was legitimately discontinued or from a bankrupt retailer. Some was stuff that was in a semi-trailer that was in an accident. My parents were cheapskates and loved that store.)
This reminds me oddly of the Food Town grocery close to me; I was randomly there getting usual groceries when I saw a guy just livid and whining at the store manager about not getting any toothbrushes cuz they were sold out. They were like a dime per toothbrush sale. Some lady earlier in the morning bought the entire stock bulks supply…and the guy was claiming she prolly got them to resell at a dollar at her own store.
There was also one time I went to Walmart, and a lady confessed to me (we were in a long line) that she comes to my big town Walmart twice a month (making a 2hr drive from her college town) to buy stuff to resell at her convenience store that she owned. Guess it was worth that much driving to get cheap items and upsell them.
And the time I went to comic-con here and met a seller from Seattle selling Japanese stuffed animals. It was worth it also to make the two day drive to sell the cute animals at 300 percent markup.
The effect of inflation on the value of a dollar is at 55.1%. Using an inflation calculatorbased on US Consumer Price Index that 1998 generic dollar store item should cost about $1.55 today. Any given item is subject to it’s own market forces but across their product line it’s not as significant an issue as the OP assumption.
Costs of production for many goods have gone down as mentioned above. These stores get to pick and choose which items to carry so they can target the items that have seen less inflationary pressure. The general rise in prices can be less of an issue than the CPI suggests.
As mentioned, sometimes their prices aren’t particularly competitive. They round up to a dollar on part of their product line. That gives them the ability to average the margins across a range of products that includes both rounding up and rounding down to hit the price point.
The differing customer bases can allow some price discrimination between different chunks of consumers. It’s not the same as the classic price discrimination case of movie theaters offering student discounts. The organization with the pricing power in this case is the manufacturer, not the retailer, trying to maximize profit through price discrimination between its different vendors. Given the social signalling that silly less than entirely rational human consumers seem to value, we can enable those different retailers to maintain different price points. (Yes I am making the argument that effectively some consumers are overpaying even though they could walk in and get the student ticket price to every movie.)
Dollar stores can also trim costs in other ways. IME they tend to put less into making their stores visually attractive. I also generally find longer lines during busy times when I stop in one. They cut back on labor by not having a lot of extra people around to handle those surges quickly. The one I stop into semi-regularly takes it a step further in the evenings. They put a bell on the only open register and the cashier spends most of their shift working as a stocker. The two major places for a lot of my shopping are open 24 hours even though the lower number of customers makes their labor less productive during those periods; my nearby dollar store closes. Dollar stores can increase margin by skimping on customer service and customer experience vs their competitors.
A friend of mine used to work in a Dollar Tree–she said local convenience store owners would come in and buy several carts full of stuff at a time to resell in their stores.
I’d say that the Dollar Tree chain, the one with the green signs, gets their merchandise through legitimate means. The independent stores, or worse, the pop-up flea market vendors, often go through the gray or even black markets.
If you’re talking about Dollar General, then you’re not talking about a dollar store at all.
They are just low-price retail. Hardly anything there is actually $1. And, even then, they very much do stock different things at different stores. Even the two in my town have different items, and regularly change their stock. Though they do also have DG specific stuff that’s always there.
The Dollar Tree around here shut down, and I really don’t remember it too much, but apparently it actually is a $1 store. Family Dollar, which I do remember but also shut down, was not. And the locally owned dollar shop is gone now, which is sad because they were great for cheap party decorations.
Thanks for the link about Daiso. I Googled and found out that we’re getting one in Hawaii next month! They have stores around the world including stores in California, Texas and Mexico. https://daisoglb.locationsmart.org/map.html
I don’t think it’s a true dollar store as reviews talk about items priced 150Y and up. Only items that don’t have a price tag are 100Y. One of my Youtube favs (Boyoung aka Bubbly aka Botato) visited the Daiso store in Korea (I think Seoul) that’s 8 floors! https://www.youtube.com/watch?v=5a-u8MFhtQM Note that some items, are marked with price tags over 1000 won (~$1 U.S.) which ties in with what the reports of the Japanese stores say.
Dollar stores may also sell seconds, products that are less than perfect, either directly from the manufacturer or distributors. The concept is the same as Farmer’s Markets where fruits and vegetables that don’t meet supermarket visual standards are often sold. Stores like Ross and TJ Maxx are the equivalent for clothing and household goods. Even Amazon will sell some brand new items at a discount just because the packaging is ripped or smashed.
Is “Farmer’s Markets” a local chain? I only ask because of the caps. For us, the lower-case “farmers markets” are where to go to buy high-priced produce that’s supposedly farm to table and locally grown. (I suppose it’s expensive to grow pineapples in Michigan, so perhaps the high price is justified.)
LOL, I capitalized the term because there may be different regional terms like we call flea markets, swap meets here. And yes, farmer’s markets and produce at swap meets here are usually seconds, like stubby or extra wide carrots, though some produce is priced at or above what you could get in the supermarket.
As I think about it, we used to have a place called Farmer’s Market here. I think it’s official name was Ward Farmer’s Market, but everyone just called it Farmer’s Market. It was a large warehouse that housed multiple concessions, primarily prepared food near the entrance as I recall and since I rarely ventured further than that area, don’t recall what was beyond that. I’m pretty sure there was produce further in, at least in the '70’s and '80’s.
Along the same vein, at one of my workplaces, a farmer would come around selling his seconds produce out of his car or van (depending on how big a load he had). Everything was sold in multiples of a dollar and if you bought the last one he had he would give you a discount and sometimes add in something else that’s the last one.
In some places, the expectation is that the produce sold at farmers markets is locally grown, usually by the farm whose stand is selling it. It may even be a matter of law that the seller isn’t supposed to misrepresent the origin of the produce. Also, rather than seconds, the produce is often really good quality, often organic and really fresh.
When I use the term seconds at farmer’s markets, I’m not referring to the quality of the produce, but the visual aspects, for example extra short, fat or not perfectly straight carrots. Some of the produce may be market quality visually and just overstock at the supermarkets or restaurants will take.While some of the sellers are the farmers themselves, but sometimes distributors or individuals who buy wholesale, cutting out the middleman.
One of the keys to the success of any retail store is sales in volume. This is especially true for dollar stores. Watch the checkouts and you’ll rarely see anyone buying just one or two items. After all, everything is just $1 and such a bargain! I always feel like I’ve missed a bargain if I spend less than $3-$5 at the dollar store, but I’ll happily walk out of a 7-Eleven having just bought a candy bar or bottle of soda.
Here’s an example of how a product can make it to a dollar store. Years ago, my friends from Taiwan sent some samples (actual product) of a popular pocket flashlight to China to be replicated. The original flashlights retailed for $15-20, $10 on sale and cost $4-$5 wholesale. The first run of the knock-offs cost <$0.50 to manufacture and were wholesaled for $1.50-$2.00 to regular retail stores. Less than year later, I saw them showing up in dollar stores, so the actual manufacturing cost must have gone way down either though volume or knock-offs of the knockoffs (they looked lower quality than the first run, which other than color looked and functioned the same as the originals).
Also, if you look at alibaba.com, you’ll see the ridiculously volume prices of things that sells for multiple dollars at retail stores. The regular shipping is super slow, but my Taiwanese friends knew how to get things shipped to Hawaii fast and cheap.
I just wanted to point out that 2/3 of the “dollar stores” examined are not dollar stores, but merely stores w/ dollar in their name (Dollar General, Family Dollar) which sell things for more than a dollar.
