Speaker 1: Welcome to brain Stuff, a production of I Heart Radio.
Speaker 1: Hey brain Stuff, Lauren Vogel Bomb Here. It's a quarter
Speaker 1: after nine at night on a Tuesday, and you just
Speaker 1: realize there's no milk or bread for breakfast tomorrow morning,
Speaker 1: and if you're honest with yourself, that half finished roll
Speaker 1: of toilet paper might not make it all the way
Speaker 1: through the night. It's time to hit the store, and
Speaker 1: now you've got a choice to make. The nearest grocery
Speaker 1: store is twenty five minutes away. The big box superstore
Speaker 1: is even further. Driving to either one at this hour
Speaker 1: means you won't be home and in bed until eleven.
Speaker 1: But what about that new dollar store that opened down
Speaker 1: the street doesn't even have food. If it does, you
Speaker 1: could get this shopping trip wrapped up in twenty five
Speaker 1: minutes flat. So you decide the dollar store is the
Speaker 1: best option. It's tiny and packed to the gill with neighbors,
Speaker 1: but there is actually some food. You don't recognize the
Speaker 1: brands and feel a little funny buying milk and pint bottles.
Speaker 1: That's a quarter to an eighth of the standard size
Speaker 1: for our metric friends, But after all, each one is
Speaker 1: only a dollar on your way to the toilet paper aisle,
Speaker 1: you pass a toy section and bed sheets and greeting cards,
Speaker 1: which is useful because your mom's birthday was yesterday, and
Speaker 1: there's only one person working the checkout, so the weight
Speaker 1: is a little long, but the total bill is less
Speaker 1: than thirty bucks, and you're back home before ten pm.
Speaker 1: Welcome to the dollar store economy. Dollar stores exploded during
Speaker 1: the Great Recession and have continued to do well during
Speaker 1: the COVID nineteen pandemic and the current inflationary period. There
Speaker 1: are now more than thirty four thousand of them in
Speaker 1: the United States. That's more locations than Walmart, Walgreen's, CBS, Costco, Kroger,
Speaker 1: and Home Depot combined. Once widely criticized as retail vultures
Speaker 1: preying on poor people living in food deserts, dollar stores
Speaker 1: now boast a more mixed income clientele. Button Why has
Speaker 1: the dollar store model been so successful and how does
Speaker 1: a company even make money so things for so cheap.
Speaker 1: The two biggest dollar store chains, Dollar General and Dollar Tree,
Speaker 1: which also owns Family Dollar, have been brilliant at capturing
Speaker 1: underserved demographics. Dollar General, for example, has built seventy of
Speaker 1: its stores in small rural towns with fewer than twenty people,
Speaker 1: and pinpoints new locations and areas that are fifteen to
Speaker 1: twenty miles that's around kilometers away from the nearest big
Speaker 1: box store or grocery store. A family. Dollar targets urban
Speaker 1: and low income shoppers, while Dollar Tree goes after the suburban,
Speaker 1: middle income shopper. By expanding their offerings to include more food,
Speaker 1: household cleaners, help and beauty products, paper products, and other consumables.
Speaker 1: Dollar stores have positioned themselves as a whole new shopping
Speaker 1: category called the fill in trip. As in the example above,
Speaker 1: this can tide you over until a regular trip can
Speaker 1: be made. Not only has the proliferation of dollar stores
Speaker 1: fueled this new type of shopping behave of year, but
Speaker 1: the arrival of a new dollar store often kills off
Speaker 1: local competition like the mom and pop corner store, meaning
Speaker 1: even more customers and profits for the dollar store. Because
Speaker 1: the shopping list for a pill in trip is only
Speaker 1: a few items long, the total bill at the dollar
Speaker 1: store is usually pretty low, and since many dollar store
Speaker 1: goods are still sold for a dollar each, it's tempting
Speaker 1: to think that shopping at a dollar store must be
Speaker 1: a better deal than shopping at either the local corner
Speaker 1: store or the big chain grocery store or retailer. But
Speaker 1: is this always true. Paying a dollar for that pint
Speaker 1: bottle of milk at the dollar Store is the equivalent
Speaker 1: of paying eight dollars for a full gallon, which is
Speaker 1: more expensive than the fancy organic stuff at Whole Foods. Similarly,
Speaker 1: according to an analysis by the Guardian, the one dollar
Speaker 1: bag of raisins at the dollar store may weigh only
Speaker 1: four and a half ounces or a hundred and twenty
Speaker 1: eight grams, while a seventy two ounce or two key
Speaker 1: low bag from a big box store costs ten dollars
Speaker 1: fifty cents. That's a little over half the cost per ounce.
Speaker 1: By shrinking package sizes, dollar stores can get away with
Speaker 1: charging way more per volume, which is one of the
Speaker 1: main ways they profit. Just because you only paid a
Speaker 1: dollar for that roll of aluminum foil doesn't mean that
Speaker 1: it's a good deal. The Washington Post reported that the
Speaker 1: Dollar Tree dollar roll of foil was only fifteen square
Speaker 1: feet that's one point four square meters in area, while
Speaker 1: Walmart sold a seventy five square foot or seven square
Speaker 1: meter role for four dollars and six cents. That's the
Speaker 1: equivalent of more than eighteen square feet or two square
Speaker 1: meters per dollar. Of course, if finances are tight, maybe
Speaker 1: four dollars for foil isn't an option, no matter how
Speaker 1: much of a better deal it is in the long run. Also,
Speaker 1: dollar store shopping is a no frills experience, and that's
Speaker 1: not an accident. By keeping stores small and staff at
Speaker 1: a minimum, companies are able to convert a larger portion
Speaker 1: of sales into profit. According to figures, dollar Tree caps
Speaker 1: thirty five cents of profit for each dollar of revenue.
Speaker 1: Walmart only captured twenty four point one cents per dollar
Speaker 1: for the third quarter of one. Figures remained comparable, though
Speaker 1: the gap was closing. Dollar stores are rightfully called small
Speaker 1: box retailers. The typical Dollar general is seven thousand, four
Speaker 1: hundred square feet about seven hundred square meters. The average
Speaker 1: Walmart supercenter is one hundred and seventy eight thousand square feet.
Speaker 1: That's sixteen five hundred square meters. And even though dollar
Speaker 1: stores are packed from floor to ceiling with items, the
Speaker 1: typical one only carries ten thousand individual products, while the
Speaker 1: average Walmart carries closer to ninety thousand those dollar store
Speaker 1: items are chosen for maximum profit, emphasizing long shelf life
Speaker 1: off brands and small packaging. That small size means you
Speaker 1: don't have to employ as many people, and wages of
Speaker 1: dollar stores are among the lowest in the retail industry.
Speaker 1: Dollar stores have been doing pretty well two Inflation has
Speaker 1: pushed up the cost for goods, causing non traditional, higher
Speaker 1: income shoppers to visit dollar stores along with the usual customers.
Speaker 1: Profits in were huge, but slowed down in due to
Speaker 1: supply chain issues. In late Dollar Tree became the last
Speaker 1: major dollar store brand to change his policy of charging
Speaker 1: only a dollar for most items and now charges a
Speaker 1: dollar twenty five cents per item, and they set the
Speaker 1: decision to raise prices was due to increases in labor, shipping,
Speaker 1: and fuel costs, and that several customer favorites had had
Speaker 1: to be discontinued as they were not sustainable at the
Speaker 1: one dollar price point. At the same time, dollar store
Speaker 1: staff has been quitting due to low pay in long hours,
Speaker 1: and many cities have put moratoriums on how many dollar
Speaker 1: stores can be built in an area and to prevent
Speaker 1: them from crowding out new businesses and stores that offer
Speaker 1: fresh foods. Despite these negatives, dollar stores continue to expand
Speaker 1: at a very fast rate. Dollar General plans to open
Speaker 1: one thousand and ten new stores in and remodel one thousand,
Speaker 1: seven hundred and fifty others. It also plans to open
Speaker 1: many more of its pop shelf stores, designed to appeal
Speaker 1: to a wealthier demographic, with most items priced at five
Speaker 1: dollars or less. Today's episode is based on the article
Speaker 1: how do Dollar Stores make money? On how stuff works
Speaker 1: dot Com, written by Dave Rouse. Brain Stuff is production
Speaker 1: by Heart Radio in partnership with how stuff works dot
Speaker 1: Com and is produced by Tyler Klang. Or more podcasts
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