Dollars and Sense
Joe Raedle / Staff / Getty Images News / Getty Images North America / Getty Images CC

25 Things You Didn't Know About Dollar Stores

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Dollars and Sense
Joe Raedle / Staff / Getty Images News / Getty Images North America / Getty Images CC

Dollars and Sense

The most common variety store chains in the United States tend to have "dollar" in their names, but that doesn't necessarily imply a certain cost or even mean that there are similar products in each store. We even found some items you shouldn't buy at a dollar store. We did some digging and found out some of the secrets behind "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

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Some Items May Cost More Than $1
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Some Items May Cost More Than $1

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

Products Might Be Cheaper Because They're Smaller

Products Might Be Cheaper Because They're Smaller

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.

Related: 20 Ways Companies Trick You Into Spending More Money

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You Can Find Name Brands — But They're Not Always a Bargain

You Can Find Name Brands — But Not Always At a Bargain

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.

Related: 20 Store-Brand Products with Cult Followings

They're Cutting Costs — But Still Want You to Spend More

They're Cutting Costs — But Still Want You to Spend More

Unfortunately, these stores aren't passing the savings onto consumers. Dollar General has said that it wants to make its more than 31% 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

Dollar Stores Bet Against You
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Dollar Stores Bet Against You

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."

Related: The Best and Worst States for Middle-Class Taxpayers

They Feed Off Misery

They Feed Off of Misery

It's been noted before that the upswing in Americans on food stamps and the continued struggles of millennials after the recession 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.

Related: 24 Important Things to Know When Applying for Food Assistance Programs

Know What to Buy At the Dollar Store

They Have a Type of Shopper in Mind ...

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

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... And They Actively Seek Out That Type

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?

Even Well-Off Shoppers Hunt for Bargains at Dollar Stores
They're a Massive Retail Force

There Are More Dollar Stores Than Walmarts and Costcos

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.

Related: Companies That Have Filed for Bankruptcy Since the Pandemic Began — and Which Ones Could Be Next

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The Stores Can Get Messy

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.

Related: 21 Stores and Brands You Thought Were Dead But Aren't

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Wages Are Low at Most Dollar Stores

According to Glassdoor, the average cashier makes $9 an hour or less than $18,000 a year. Store managers and assistant managers make between $45,000 and $47,000 a year, while district managers can make over $78,600. If you're stocking shelves, it's $10 an hour. Dollar General wages fall along the same lines.  

Related: Can You Guess the Minimum Wage the Year You Were Born?

Employees Are Often Required to Multi-Task
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It's a Two-Horse Race ...

Dollar Tree (which also owns Family Dollar) has more than 15,000 locations and amassed $23.6 billion in revenue last year. Its chief competitor, Dollar General, has more than 16,000 locations and made more than $27.8 billion. By comparison, a second-tier competitor such as Five Below has only 1.000 locations.

Related: 19 Legendary Restaurant Rivalries That Divide America

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Kristin B./Yelp

… But There Are Plenty of Little Guys

Aside from Five Below, there are chains as large as the nearly 390-store 99 Cents Only based out of California. Most dollar store chains are much smaller, though.

Related: 28 Regional Grocery Stores That Shoppers Love

They're Pressuring Competitors Big and Small

They're Pressuring Competitors Big and Small

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.

Related: Best "Main Street" Shopping Districts in All 50 States

Their Numbers Are Growing
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They Tend to Cluster
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Amazon Boxes
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Even Dollar Stores Struggle to Keep up With Amazon

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.

Related: 16 Businesses That Amazon Has Threatened

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Wholesalers and Direct Suppliers Save Them Money

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

They Make Many Dollars
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They Make Many Dollars

Last year, Dollar Tree and Dollar General alone made $51.4 billion in revenue. That's two-thirds more than what Macy's made, but not even half of what Kroger brought in.

Related: 18 Secrets for Shopping at Kroger

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They're a Bulk Store in Reverse

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

Family Dollar Store
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They Don't Franchise

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.

Related: 18 Ways to Build Wealth During a Recession

They're High Margin