How do Dollar Stores stay in Business?

haven't cataloged them quite as extensively as you have. I had forgotten this was one of your hobbies. But but I will acknowledge there are a lot of them. So I looked into it this week, and it turns out that even though the stores seem the same, each brand actually targets a completely different market. So what does that mean exactly? Dollar General A Friendly targets older customers in more rural areas, so they've intentionally built their stores in

small towns with fewer than twenty people. And then on the opposite side, you've got things like five Below and it's target demographics teens and young adults, so you actually find those in suburban shopping malls. Actually, when you mentioned that the first time, I was I didn't remember that, But now that you say that, I can picture these being in shopping malls. So what about Dollar Tree and what was that you said? Family Dollar? Like, I know

I've seen both of those around. What who do they target? So what's weird is they're actually owned by the same company. Dollar Tree bought Family Dollar back in two thousand fifteen, for I believe it's a nine billion individual dollars and a huge reason for that, biot was because Dollar Tree caters to middle income shoppers and Family Dollar goes after

the lower income ones, and the company wanted both markets. Yeah, it's funny, but I I feel like we do sort of treat these dollar chains interchangeably, like they're just kind of there. You You really would never guess that behind the scenes they were playing this pretty intricate game with each other, like carving up the market in the way

that they are. Yeah, there's actually way more going on with dollar stores than people might guess from you know, how they turn to profit, whether one dollar steaks are really a good deal after all? So why don't we dig in? Y he Their podcast listeners welcome to part time genius. I'm Will Pearson and it's always I'm joined by my good friend Manes Ticketer and on the other side of that soundproof glass testing out his latest fine

from the dollar store. That's our friend and producer Lowell Berlante. And what a fine this was. I mean, hold the box up again, low I need to see it just a little bit higher. So it's basically a Nettie pot, except it's called a Yetti pot for some reason, and on the front called it a little bit closer. The front of the box shows a couple of what I presume are meant to be yettis wearing a teapot up

its nose. It's it's kind of a weird, but I would definitely pay two dollars for that twice twice as much. So I definitely want to talk about some of the other strange stuff that turns up, you know, at dollar stores. But why don't we start by getting a sense for just how big a success story dollar stores really are so they don't get a ton of respect. But in doing the research, Gate basically pointed out that they're kind

of the unsung kings of retail. Yeah, I don't know, if this is true, but it feels like there are more dollar stores now than there were when when we were growing up. It's definitely true. So dollar stores have been a fixture of American strip malls since the nineteen fifties, but one of their biggest booms came during the Great Recession of two thousand seven, and as the economy declined, dollar stores sales went way way up, and it resulted in this swell of like news stores opening up all

over the country. But the really surprising part is that this popularity hasn't worn off like dollar stores just keep on thriving. And in fact, between two thousand ten and two thousand thirteen, the Family Dollar chain opened fifteen hundred news stores, which is more than one a day for four years in a row. Holy cow. And so I was guessing insane. Yeah, I'm guessing it wasn't just a

Family Dollar doing this too. Yeah. So the other chains like Dollar Tree and Dollar General they were expanding to. Two thousand thirteen ended up being this banner year for dollar stores, And in July of that year, so many new locations open that it averaged out to one new store opening every six hours all month long. That's interesting. It does feel like too many dollar stores if we're being so how many nights? You don't? You disagree strongly said, so,

how many are we up to now? So all told, there are more than thirty thousand dollar stores in the US right now, And according to Forest, that's more locations than the six biggest US retailers put together. So that's like Walmart, Walgreens, CVS, Costco, Kroger, and Home Depot that's on this list here. So you know, the wildest part is that analysts say new dollar stores will key popping up like this for at least another three years before

the demand levels out. You know, I'm guessing a good deal of that success is thanks to the strategy you we're talking about at the beginning of the show, like the way dollar store brands tend to divvy up the market between themselves so together they've got a lock on on really like every person who might potentially shop at

a dollar store. That's right, And and dollar stores really do have a much more mixed income clientele than you might guess, But that comes with some issues as well, Like one of the big concerns with having a high number of dollar stores is that the company's mostly targets struggling communities when opening new locations, and as a result, a single small talent or a city neighborhood can wind up with three or four different dollar stores but no

actual grocery stores, which obviously is an ideal, since most dollar stores don't carry fresh fruits or vegetables or meats. Alright, so dollar stores can and do contribute to the problem of what we call like food deserts. But but you're saying that high earners shop at dollar stores too, Yeah,

and in much larger volume than you might expect. So according to this two thousands sick Team report from Reuter's twenty nine, of millennial households earning more than a hundred thousand dollars per year say they shop at least one of the big three dollar chains. So all together, these schoppers make up roughly I guess of the total sales from those three chains. And it's pretty shocking when you think about it. But it also makes sense since everyone

you know likes a bargain. Yeah. Well, well, speaking of bargains, that was something I wondered about this week, Like our dollar store prices actually a good deal, So of course we had to look into this, and it turns out that no, they're really not, or at least not always so.

For example, dollar stores tend to sell milk in sixteen ounce bottles for one dollar each, which does sound like a steal, but at that rate, you're actually paying eight dollars for a full gallon, which sounds like New York prices. Maybe don't shop for milk at dollar stores. But what about like the non perishable items, that kind of stuff like you wouldn't really see the same kind of markup on right, Well, it depends. I mean you you can end up with the same type of despair atty when

you look at something like raisins or aluminum foil. Like The trick in all of these cases is to offer familiar products and slightly smaller packages, so most shoppers don't spot the size differences or do an ounce to ounce cost breakdown when they're in the aisle. But that said, there are some dollar store products that are generally solid deals, like toiletries paper goods, for example, and you can buy a roll of wrapping paper or a giant tub of cotton swabs for half the price that you would at

a big box store. So keep that in mind next time. You love the idea of buying wrapping paper and just uh, you know, putting it around cotton swabs. So it feels like that makes a lot of sense to meaing. Yeah, well, there's another dollar store perk that I learned this week, because even though shopping at the dollar store may not always give you the most bang for your buck, it is a good way to satisfy your shopping craving on

a budget. So if you're someone who enjoys going shopping, then you're probably familiar with the small rush of pleasure that comes from just making a purchase, and you can actually think your brain for that. So whenever we anticipate a reward, which in this case would be buying something new,

our brains respond by triggering this kick of dopamine. So for an average shopper, the more things you buy, the more dopamine levels rise, which you know, I guess is why some people become compulsive shoppers, right, Yeah, that's exactly right. And so that's where dollar stores come in because for most people, the pleasure we get from shopping doesn't always

scale with the amount of money we're spending. So instead is that number of items that we might buy, so each one translates into its own little kick of dopamine. So the next time you feel the urge for a shopping spree, you might want ahead your local dollar store because you can fill the basket on the cheap and still walk out feeling like a million bucks. I'm sure

that's exactly how it would play out. All right, Well, now that we've talked a little bit about who's shopping at dollar stores, let's look at some of the products that are buying there. But first a quick break. You're listening to part time Genius and we're talking about the best and worst deals to be had at the dollar store. Now, speaking of which, the time has come at last, Mango, we need to talk about the one dollar steaks. I love, like how offended you were by this, Like we were

talking about this beforehand. It just feels ridiculous, and it's not like someone's actually gonna force you to eat what it is. It's the principle of the thing, Mango. But I feel like we should back up a minute because some listeners out there might be a wee bit confused by all of this talk of a one dollar steak.

So we mentioned earlier that dollar stores don't usually carry fresh foods, but a growing number of them do stock frozen foods now And one of the best or worst deals is the one dollar ribby and the dollar Tree freezer section. So these four ounds boneless beef steaks are sold preseasoned in a brine, and they're what's called you know, the util the cut I guess, which are the parts

of the cow used, and institutional kitchens. So the stakes Dollar Tree cells are sourced from a company called Stampede Meat Ink. I'm really jealous. I wish I had started a company called Stampede Meeting. It's like the worst name. It sounds like they sell steaks made from cows that got trampled by bigger cows. Well, you never know, but if you're feeling adventurous, you can buy one of these one dollar steaks for yourself at any dollar Tree with

a freezer section. And if you read the reviews online, a lot of people compare the meat to you know, say rubber, or or maybe they just say it doesn't cook that well. So I'm really curious. Now, so did you find anyone who actually liked these one dollar sticks? I did find one positive review but even then, the one who actually bought the steak, she didn't like it. So why is that? Why is that a positive review?

Well because her dog apparently did love it. So to be fair, I did come across some surprisingly measured responses from actual humans. So, for example, in two thousand and sixteen, a TV station in Cincinnati held a taste test for local firefighters. So they were asked to sample a butcher's cut, a supermarket cut, and of course the one dollar ribbi. And the reactions were mixed among the firefighters you might expect, but some of the more positive views were it's not

terrible and I guess it was meat. Okay. So here's another product you probably didn't know you could buy at the dollar store, or at least I didn't know you could buy it, And that's a home pregnancy test kit. But unlike those one dollar ribbis, these pregnancy kits are actually worth the money. In fact, the ones carried at a lot of I guess the dollar tree stores are the same kind used in most hospitals. Oh wow, I mean, maybe this is a bit unfair, but I'd be so

hesitant to trust a one dollar pregnancy test. I mean that that feels so cheap for that purpose, Like, how could it actually be reliable? So I was wondering about this myself, and it turns out the tests are are actually pretty reliable, and that's because most Nancy tests are made to detect just one specific hormone that's produced during pregnancy. It's like a simple enough task that most kits can

pull it off regardless of the price. But you know, that's not to say there aren't advantages to using a more expensive test. You know, they can often detect lower amounts of that same hormone earlier in the pregnancy, so you know, a Dollar Store kit might not show that the woman is pregnant until a little later in the pregnancy. I do love how the steak is super shady, but like the pregnancy tests, we feel like they're so trustworthy. I guess it kind of balances each other out. Well.

What's funny is that, like one of the other items that Dollar Tree carries that supposedly like this hidden gem is their ovulation predictor, it actually has one of the highest product rankings of all the Dollar Tree items. I guess it's got four point six stars, and the customer reviews say it works just as well as the more

expensive brands. I feel like we might just have to take their word for that, But for now, I thought we could switch gears and talk about something I've always wondered about, which is how dollar stores actually make money. I feel like it's just through something a lot of stay can, pregnancy cuts, It's all there is. I mean, I guess that is true, but I meant more like, how do dollar stores turn a profit off of these, you know, really inexpensive products. But before we get into that,

let's take one more quick break. Welcome back to part time genius. All right, Mango, So, another thing I was curious about this week is how dollar stores managed to turn profits off of you know, these really inexpensive items.

Because I found some sales figures from a few years back, and I was shocked to see that Dollar Tree makes thirty five cents of profit for each dollar of revenue, compared to twenty four cents per dollar that you know, place like Walmart makes, which is surprising because you always hear about how well Walmart negotiates down prices, you know,

just because of all the volume they sell. Right, So it may be wonder like, is it just the high sales volume at a dollar store that helps make up for the low prices or is there more going on? And what I found is that while volume does play a huge part, a lot of what makes dollar stores profitable is that they have this no frills approach to the shopping experience. For instance, at a big box store like a Walmart, you're looking at nearly two hundred thousand

square feet of shopping space. They're just enormous. But I meanwhile, the average Dollar general is just over seven thousand square feet. I guess that's a smaller box. It is. It's it's a much smaller boxing. Maybe even if you're not good at math, like that is a much smaller boxing. Not only does the smaller footprint translate into lower leasing costs, it also means that the dollar stores don't need to

hire as many workers. In fact, a typical dollar store staff is made up of just eight or nine people, while the average Walmart staff is closer to three hundred people. So all of this together helps keep down the overhead cost and that, along with the high volume of sales, is why dollar stores are some of the most profitable stores in the entire retail sector. Well, you know, since we're talking about what sets dollar stores apart from the

larger cousins. I do want to highlight what is probably my biggest beef with these, you know, quote dollar stores, which is that, you know, somewhere along the line, most dollar stores became dollar and up stores, like even cents only stores now sell products for more than cents. So now you can walk into dollar stores and find items

that cost to five and as much as ten dollars. Yeah, more more like multi dollar stores, I guess, yeah, just like regular stores, which feels like borderline false advertising, but you know, it's becomfretty accepted at this point. So none of the big dollar chains still charged just a dollar. We actually looked into this, and it seems that, uh, I guess, the one dollar pricing has been dollar Tree's

claim to fame for their entire existence. For the thirty three years it's been in business, the company has always stuck to its original policy. And you know that that's despite like inflation, despite growing competition, uh, manufacturing costs, whatever, like, despite all of that, Dollar Tree execs have kind of stood by this one dollar policy for everything in their store.

I'm guessing there's there's a butt coming to this. Yeah. So, so the company finally about to pressure from some of its investors recently, and according to a company statement made in March two, dollar Tree has now begun testing additional price points in some of its stores. And you know, if the move boost profits at the test stores, like the investors hope it will do, then chances are will likely be seeing you know, dollar plus items in all

their store shelves before the years out. Yeah so, so, in other words, stock up on those one dollar ribbi's, right, because you know they could be three dollar ribbis or whatever the next few years. I mean, it is kind of sad that like these may very well be the final days of the last true dollar store if you think about it, Yeah, it's the end of an era. But if you're looking for something that you can still get on the super Chief, we've got a boatload of

facts at very reasonable prices. So why don't we do the fact off? Okay, so we started the show talking about how dollar stores are pretty much everywhere these days, and it feels like one is never more than a few miles away at any given time, And it turns out that's actually true. So Dollar General has over fifteen thousand stores spread throughout forty four states, and according to the company, that means the US population now lives within just five miles of one of its stores. All right,

well here's a quick one. So when you're in the big box stores, you really think of the tricks that they use to get people to, you know, go for the impulse buys or things like that, and actually dollar stores use many of the same tricks. So, for example, drug stores tend to put food and drinks up front to act as these impulse buys, but the actual pharmacies are tucked in the very back of the store, and

dollar stores act under the same principle. So food and toys or stocked in the back of the store since they tend to be the most popular items and sees, the impulse buys go right up front near the registers. So unfortunately, one place where dollar stores do different from larger stores is that they typically don't offer employee discounts, so unless a product is damaged or open on the shelf,

employees have to pay the full dollar like everybody else. Well, paying full price is always a drag, but if you ask some dollar store employees, they'll tell you that the worst part of their job is having to deal with the dreaded Hot Wheels toy collectors, and that's actually not exclusive to Dollar stores either, So over zealous Hot Wheels fans are actually kind of the bane of any retail store that stocks them. Really, I don't get it. What's so bad about kids who collect toy cars? So nothing

at all. It's actually the adults who collect toys that are the problem. And there's a big community of adult Hot Wheels fans out there, and they're kind of infamous for well, I mean, you can call it their dedications.

So so Metal Fliss had a piece last year where they spoke to a Dollar Tree manager named Nate, and according to him, these so called Hot Wheels hunters will quote scour the Internet and find out when stores are getting shipments, then show up and demand I go to find the one box of hot Wheels out of two thousand other boxes so that they can be the first to buy the I mean that does sound like a headache for the employees, especially if these guys are showing

up like every week to do this. I mean, it's more of a nightmare than that they fairly show up every day. In a lot of cases, and so the collectors who go to local stores every morning when it opens are actually have a name, and and they go by the name door Warmers. All right. Well, still that fact is a nice reminder that dollar stores do indeed

stocks and brand name products like hot wheels. But one thing you might not know is that some dollar stores even have their own in house or private label brands. And we usually think of these with the like big box stores. But the most successful example is probably Dollar General's line of healthcare products, which the company sells under the brand name rex All. So it's a it's a strategy that's paid off for Dollar General to like. The rex All brand now accounts for more than two hundred

million dollars of the company's annual sales. Here's the weird one I found. So the founder of Walmart one of the founders of Dollar Tree both got their start in business by running the same kind of chain store. Uh. These were called Ben Franklin stores, and some of the franchise stores are actually still around today. You can think of them kind of as the prototype to dollar stores.

They had lots of different items like a general store, but sold at discount prices, and these dollar and up Ben Franklin Stores turned out to be a great way for both Sam Walton and kr Perry to learn the ropes of retail, and after cutting their teeth as franchise owners, both men soon went on to establish successful chain stores of their own. So the guys behind the most successful big box chain and the most successful dollar store chain both started in the same place. That's pretty wild. That

is a weird coincidence. So I think you deserve the trophy this week, which I've subbed out for a one dollar ribby Mango, just to bring it home nicely done. I don't know if that feels like a victory exactly, having to take his home. It's a victory. Well if you if you don't want it, low lead and I'm sure all right, Well that's gonna do it for today's Part Time Genius for myself, Mango, Gabe, and Little Thing. So much for listening. We'll be back soon with another episode. Kay.

Part Time Genius is a production of I Heart Radio. For more podcasts from my Heart Radio, visit the I Heart Radio app, Apple podcast, or wherever you listen to your favorite show. H