1 00:00:01,800 --> 00:00:04,320 Speaker 1: Welcome to brain Stuff, a production of I Heart Radio. 2 00:00:07,960 --> 00:00:11,799 Speaker 1: Hey brain Stuff, Lauren Vogel Bomb Here. It's a quarter 3 00:00:11,880 --> 00:00:14,239 Speaker 1: after nine at night on a Tuesday, and you just 4 00:00:14,360 --> 00:00:17,600 Speaker 1: realize there's no milk or bread for breakfast tomorrow morning, 5 00:00:18,160 --> 00:00:20,760 Speaker 1: and if you're honest with yourself, that half finished roll 6 00:00:20,800 --> 00:00:22,360 Speaker 1: of toilet paper might not make it all the way 7 00:00:22,360 --> 00:00:25,720 Speaker 1: through the night. It's time to hit the store, and 8 00:00:25,800 --> 00:00:28,479 Speaker 1: now you've got a choice to make. The nearest grocery 9 00:00:28,480 --> 00:00:31,520 Speaker 1: store is twenty five minutes away. The big box superstore 10 00:00:31,560 --> 00:00:34,360 Speaker 1: is even further. Driving to either one at this hour 11 00:00:34,560 --> 00:00:37,080 Speaker 1: means you won't be home and in bed until eleven. 12 00:00:37,800 --> 00:00:40,319 Speaker 1: But what about that new dollar store that opened down 13 00:00:40,360 --> 00:00:43,519 Speaker 1: the street doesn't even have food. If it does, you 14 00:00:43,520 --> 00:00:45,800 Speaker 1: could get this shopping trip wrapped up in twenty five 15 00:00:45,800 --> 00:00:49,839 Speaker 1: minutes flat. So you decide the dollar store is the 16 00:00:49,840 --> 00:00:53,560 Speaker 1: best option. It's tiny and packed to the gill with neighbors, 17 00:00:53,600 --> 00:00:56,760 Speaker 1: but there is actually some food. You don't recognize the 18 00:00:56,760 --> 00:00:59,600 Speaker 1: brands and feel a little funny buying milk and pint bottles. 19 00:00:59,760 --> 00:01:02,040 Speaker 1: That's a quarter to an eighth of the standard size 20 00:01:02,040 --> 00:01:05,040 Speaker 1: for our metric friends, But after all, each one is 21 00:01:05,080 --> 00:01:07,959 Speaker 1: only a dollar on your way to the toilet paper aisle, 22 00:01:08,040 --> 00:01:10,959 Speaker 1: you pass a toy section and bed sheets and greeting cards, 23 00:01:11,040 --> 00:01:14,600 Speaker 1: which is useful because your mom's birthday was yesterday, and 24 00:01:14,640 --> 00:01:16,720 Speaker 1: there's only one person working the checkout, so the weight 25 00:01:16,800 --> 00:01:18,720 Speaker 1: is a little long, but the total bill is less 26 00:01:18,760 --> 00:01:22,880 Speaker 1: than thirty bucks, and you're back home before ten pm. 27 00:01:23,000 --> 00:01:27,040 Speaker 1: Welcome to the dollar store economy. Dollar stores exploded during 28 00:01:27,080 --> 00:01:29,480 Speaker 1: the Great Recession and have continued to do well during 29 00:01:29,480 --> 00:01:33,840 Speaker 1: the COVID nineteen pandemic and the current inflationary period. There 30 00:01:33,840 --> 00:01:35,959 Speaker 1: are now more than thirty four thousand of them in 31 00:01:35,959 --> 00:01:41,760 Speaker 1: the United States. That's more locations than Walmart, Walgreen's, CBS, Costco, Kroger, 32 00:01:41,880 --> 00:01:47,080 Speaker 1: and Home Depot combined. Once widely criticized as retail vultures 33 00:01:47,160 --> 00:01:50,480 Speaker 1: preying on poor people living in food deserts, dollar stores 34 00:01:50,560 --> 00:01:55,640 Speaker 1: now boast a more mixed income clientele. Button Why has 35 00:01:55,680 --> 00:01:58,440 Speaker 1: the dollar store model been so successful and how does 36 00:01:58,440 --> 00:02:00,960 Speaker 1: a company even make money so things for so cheap. 37 00:02:02,680 --> 00:02:06,200 Speaker 1: The two biggest dollar store chains, Dollar General and Dollar Tree, 38 00:02:06,320 --> 00:02:09,840 Speaker 1: which also owns Family Dollar, have been brilliant at capturing 39 00:02:09,960 --> 00:02:14,959 Speaker 1: underserved demographics. Dollar General, for example, has built seventy of 40 00:02:15,000 --> 00:02:18,640 Speaker 1: its stores in small rural towns with fewer than twenty people, 41 00:02:19,040 --> 00:02:21,679 Speaker 1: and pinpoints new locations and areas that are fifteen to 42 00:02:21,720 --> 00:02:25,480 Speaker 1: twenty miles that's around kilometers away from the nearest big 43 00:02:25,480 --> 00:02:29,320 Speaker 1: box store or grocery store. A family. Dollar targets urban 44 00:02:29,440 --> 00:02:33,040 Speaker 1: and low income shoppers, while Dollar Tree goes after the suburban, 45 00:02:33,120 --> 00:02:38,680 Speaker 1: middle income shopper. By expanding their offerings to include more food, 46 00:02:38,840 --> 00:02:43,000 Speaker 1: household cleaners, help and beauty products, paper products, and other consumables. 47 00:02:43,440 --> 00:02:46,440 Speaker 1: Dollar stores have positioned themselves as a whole new shopping 48 00:02:46,440 --> 00:02:50,720 Speaker 1: category called the fill in trip. As in the example above, 49 00:02:51,040 --> 00:02:53,440 Speaker 1: this can tide you over until a regular trip can 50 00:02:53,480 --> 00:02:58,080 Speaker 1: be made. Not only has the proliferation of dollar stores 51 00:02:58,120 --> 00:03:00,760 Speaker 1: fueled this new type of shopping behave of year, but 52 00:03:00,880 --> 00:03:03,560 Speaker 1: the arrival of a new dollar store often kills off 53 00:03:03,680 --> 00:03:07,080 Speaker 1: local competition like the mom and pop corner store, meaning 54 00:03:07,160 --> 00:03:11,640 Speaker 1: even more customers and profits for the dollar store. Because 55 00:03:11,639 --> 00:03:13,560 Speaker 1: the shopping list for a pill in trip is only 56 00:03:13,600 --> 00:03:15,880 Speaker 1: a few items long, the total bill at the dollar 57 00:03:15,960 --> 00:03:19,320 Speaker 1: store is usually pretty low, and since many dollar store 58 00:03:19,360 --> 00:03:22,360 Speaker 1: goods are still sold for a dollar each, it's tempting 59 00:03:22,400 --> 00:03:24,640 Speaker 1: to think that shopping at a dollar store must be 60 00:03:24,680 --> 00:03:27,120 Speaker 1: a better deal than shopping at either the local corner 61 00:03:27,200 --> 00:03:30,920 Speaker 1: store or the big chain grocery store or retailer. But 62 00:03:31,280 --> 00:03:36,000 Speaker 1: is this always true. Paying a dollar for that pint 63 00:03:36,040 --> 00:03:38,440 Speaker 1: bottle of milk at the dollar Store is the equivalent 64 00:03:38,440 --> 00:03:41,080 Speaker 1: of paying eight dollars for a full gallon, which is 65 00:03:41,120 --> 00:03:44,920 Speaker 1: more expensive than the fancy organic stuff at Whole Foods. Similarly, 66 00:03:44,960 --> 00:03:47,840 Speaker 1: according to an analysis by the Guardian, the one dollar 67 00:03:47,920 --> 00:03:50,280 Speaker 1: bag of raisins at the dollar store may weigh only 68 00:03:50,280 --> 00:03:52,160 Speaker 1: four and a half ounces or a hundred and twenty 69 00:03:52,200 --> 00:03:55,000 Speaker 1: eight grams, while a seventy two ounce or two key 70 00:03:55,040 --> 00:03:57,480 Speaker 1: low bag from a big box store costs ten dollars 71 00:03:57,480 --> 00:04:01,080 Speaker 1: fifty cents. That's a little over half the cost per ounce. 72 00:04:03,120 --> 00:04:06,160 Speaker 1: By shrinking package sizes, dollar stores can get away with 73 00:04:06,280 --> 00:04:09,120 Speaker 1: charging way more per volume, which is one of the 74 00:04:09,200 --> 00:04:12,080 Speaker 1: main ways they profit. Just because you only paid a 75 00:04:12,160 --> 00:04:14,640 Speaker 1: dollar for that roll of aluminum foil doesn't mean that 76 00:04:14,680 --> 00:04:18,680 Speaker 1: it's a good deal. The Washington Post reported that the 77 00:04:18,680 --> 00:04:21,919 Speaker 1: Dollar Tree dollar roll of foil was only fifteen square 78 00:04:21,960 --> 00:04:24,960 Speaker 1: feet that's one point four square meters in area, while 79 00:04:25,000 --> 00:04:27,719 Speaker 1: Walmart sold a seventy five square foot or seven square 80 00:04:27,760 --> 00:04:31,279 Speaker 1: meter role for four dollars and six cents. That's the 81 00:04:31,320 --> 00:04:34,279 Speaker 1: equivalent of more than eighteen square feet or two square 82 00:04:34,320 --> 00:04:38,520 Speaker 1: meters per dollar. Of course, if finances are tight, maybe 83 00:04:38,560 --> 00:04:41,359 Speaker 1: four dollars for foil isn't an option, no matter how 84 00:04:41,480 --> 00:04:45,400 Speaker 1: much of a better deal it is in the long run. Also, 85 00:04:45,600 --> 00:04:48,720 Speaker 1: dollar store shopping is a no frills experience, and that's 86 00:04:48,720 --> 00:04:51,880 Speaker 1: not an accident. By keeping stores small and staff at 87 00:04:51,920 --> 00:04:54,760 Speaker 1: a minimum, companies are able to convert a larger portion 88 00:04:54,800 --> 00:04:59,960 Speaker 1: of sales into profit. According to figures, dollar Tree caps 89 00:05:00,279 --> 00:05:03,400 Speaker 1: thirty five cents of profit for each dollar of revenue. 90 00:05:03,640 --> 00:05:06,679 Speaker 1: Walmart only captured twenty four point one cents per dollar 91 00:05:07,680 --> 00:05:11,120 Speaker 1: for the third quarter of one. Figures remained comparable, though 92 00:05:11,160 --> 00:05:16,200 Speaker 1: the gap was closing. Dollar stores are rightfully called small 93 00:05:16,240 --> 00:05:20,040 Speaker 1: box retailers. The typical Dollar general is seven thousand, four 94 00:05:20,120 --> 00:05:23,640 Speaker 1: hundred square feet about seven hundred square meters. The average 95 00:05:23,640 --> 00:05:27,080 Speaker 1: Walmart supercenter is one hundred and seventy eight thousand square feet. 96 00:05:27,240 --> 00:05:31,080 Speaker 1: That's sixteen five hundred square meters. And even though dollar 97 00:05:31,120 --> 00:05:34,120 Speaker 1: stores are packed from floor to ceiling with items, the 98 00:05:34,160 --> 00:05:38,359 Speaker 1: typical one only carries ten thousand individual products, while the 99 00:05:38,360 --> 00:05:42,480 Speaker 1: average Walmart carries closer to ninety thousand those dollar store 100 00:05:42,520 --> 00:05:46,279 Speaker 1: items are chosen for maximum profit, emphasizing long shelf life 101 00:05:46,360 --> 00:05:51,520 Speaker 1: off brands and small packaging. That small size means you 102 00:05:51,640 --> 00:05:54,120 Speaker 1: don't have to employ as many people, and wages of 103 00:05:54,200 --> 00:05:56,960 Speaker 1: dollar stores are among the lowest in the retail industry. 104 00:05:58,360 --> 00:06:02,240 Speaker 1: Dollar stores have been doing pretty well two Inflation has 105 00:06:02,240 --> 00:06:05,200 Speaker 1: pushed up the cost for goods, causing non traditional, higher 106 00:06:05,279 --> 00:06:08,960 Speaker 1: income shoppers to visit dollar stores along with the usual customers. 107 00:06:09,560 --> 00:06:13,440 Speaker 1: Profits in were huge, but slowed down in due to 108 00:06:13,520 --> 00:06:18,680 Speaker 1: supply chain issues. In late Dollar Tree became the last 109 00:06:18,800 --> 00:06:21,800 Speaker 1: major dollar store brand to change his policy of charging 110 00:06:21,880 --> 00:06:24,800 Speaker 1: only a dollar for most items and now charges a 111 00:06:24,839 --> 00:06:27,600 Speaker 1: dollar twenty five cents per item, and they set the 112 00:06:27,640 --> 00:06:31,159 Speaker 1: decision to raise prices was due to increases in labor, shipping, 113 00:06:31,160 --> 00:06:34,160 Speaker 1: and fuel costs, and that several customer favorites had had 114 00:06:34,240 --> 00:06:36,719 Speaker 1: to be discontinued as they were not sustainable at the 115 00:06:36,800 --> 00:06:40,680 Speaker 1: one dollar price point. At the same time, dollar store 116 00:06:40,720 --> 00:06:43,640 Speaker 1: staff has been quitting due to low pay in long hours, 117 00:06:44,120 --> 00:06:46,880 Speaker 1: and many cities have put moratoriums on how many dollar 118 00:06:46,960 --> 00:06:49,240 Speaker 1: stores can be built in an area and to prevent 119 00:06:49,279 --> 00:06:52,320 Speaker 1: them from crowding out new businesses and stores that offer 120 00:06:52,400 --> 00:06:57,440 Speaker 1: fresh foods. Despite these negatives, dollar stores continue to expand 121 00:06:57,520 --> 00:07:00,680 Speaker 1: at a very fast rate. Dollar General plans to open 122 00:07:00,800 --> 00:07:05,520 Speaker 1: one thousand and ten new stores in and remodel one thousand, 123 00:07:05,560 --> 00:07:08,680 Speaker 1: seven hundred and fifty others. It also plans to open 124 00:07:08,800 --> 00:07:12,000 Speaker 1: many more of its pop shelf stores, designed to appeal 125 00:07:12,040 --> 00:07:15,040 Speaker 1: to a wealthier demographic, with most items priced at five 126 00:07:15,080 --> 00:07:23,160 Speaker 1: dollars or less. Today's episode is based on the article 127 00:07:23,240 --> 00:07:25,400 Speaker 1: how do Dollar Stores make money? On how stuff works 128 00:07:25,400 --> 00:07:28,160 Speaker 1: dot Com, written by Dave Rouse. Brain Stuff is production 129 00:07:28,240 --> 00:07:30,280 Speaker 1: by Heart Radio in partnership with how stuff works dot 130 00:07:30,320 --> 00:07:33,280 Speaker 1: Com and is produced by Tyler Klang. Or more podcasts 131 00:07:33,280 --> 00:07:36,360 Speaker 1: from my heart Radio, visit the iHeart Radio app, Apple Podcasts, 132 00:07:36,440 --> 00:07:38,200 Speaker 1: or wherever you listen to your favorite shows.