America has never had so many dollar stores. Dollar General, Family Dollar, Dollar Tree, and 99 Cents Only are the big fish, with shoals of smaller competitors—tens of thousands of them. Advocates say they go where other retailers won't, filling essential needs in rural or underprivileged communities. Crafters say they facilitate their hobbies. Mom bloggers say they stock the most accurate pregnancy tests.
There's something for everyone in the dollar store, especially in the anxiety-ridden post-recession economy: By 2011 it was affluent households that were driving growth in the sector, making up some 22% of Dollar General customers. These customers, Jack Hitt wrote for the New York Times magazine, were "people who, though they have money, feel as if they don't, or soon won't."
But the dollar store boom has come at a cost. Critics say there's more to the dollar store economy than savings—and that even those great deals may not be as great as they appear. The stores erode jobs and local businesses, turn neighborhoods into grocery deserts, and encourage impulse consumption.
Let's take a trip down the aisles.
 Dollar storesFebruary 07, 2019 |
Cheaper by the dozen
America has never had so many dollar stores. Dollar General, Family Dollar, Dollar Tree, and 99 Cents Only are the big fish, with shoals of smaller competitors—tens of thousands of them. Advocates say they go where other retailers won't, filling essential needs in rural or underprivileged communities. Crafters say they facilitate their hobbies. Mom bloggers say they stock the most accurate pregnancy tests.
There's something for everyone in the dollar store, especially in the anxiety-ridden post-recession economy: By 2011 it was affluent households that were driving growth in the sector, making up some 22% of Dollar General customers. These customers, Jack Hitt wrote for the New York Times magazine, were "people who, though they have money, feel as if they don't, or soon won't."
But the dollar store boom has come at a cost. Critics say there's more to the dollar store economy than savings—and that even those great deals may not be as great as they appear. The stores erode jobs and local businesses, turn neighborhoods into grocery deserts, and encourage impulse consumption.
Let's take a trip down the aisles.
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30,496: Number of dollar stores in the US in 2016, expected to increase to nearly 38,000 by 2021
41: Walmart Express outlets bought by Dollar General in 2016
$9 billion: Price paid for Family Dollar by Dollar Tree in 2015. The acquisition doesn't seem to have paid off: Dollar Tree's stock has fallen around 15% in the past year.
$14: Cost of a barbecue at Dollar General
50: Estimated number of dollar stores in Tulsa, Oklahoma—one for every 8,000 residents. Neighboring North Tulsa does not have a single full-service grocery store.
$1: Cost of a silver-plated ice pitcher, a black-walnut coat stand, or a 12-bladed pearl-handled knife at the Dollar Store in Lower Manhattan in 1871. (Around $20 today.)
Dollar stores are so quintessentially American that there's a red, white, and blue-themed franchise in India called US Dollar Store.
How do dollar stores actually make money?
Dollar stores are more profitable than many of their department store competitors, despite smaller numbers on the price tags.
To begin with, dollar stores often sell off-brand items, with a lower starting cost. They might be bargain knock-offs, or products they've managed to obtain incredibly cheaply: discontinued products, deadstock which has not sold well elsewhere, or over-runs.
On top of that, when they do sell name-brand items such as Tide laundry detergent or Planters nuts, they tend to sell smaller containers at higher per-volume costs. The number on the price tag may be less—an important factor for those with limited income—but the savings are actually non-existent.
To further boost profits, labor costs are extremely low: staff members are few, and are often paid as little as legally possible (sometimes even less than that).
"No one supposed it would last long. The stock would run out. The goods would prove to be worthless; people would find it to be a swindle, or the proprietors would be ruined. So everybody said."
—The New York Times in 1869, reporting on the "well-merited and great success" of the Dollar Store.
"Always have hope." "I need a miracle." "Life is a journey, enjoy the ride."
—Inspirational quotes on magnets sold at Dollar Tree. The company has struggled financially since 2015 and may soon be forced to push prices above the $1 threshold.
Pop quiz Which of these has never been an Australian discount store? |
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1879: Potato farmer Frank Winfield Woolworth opens his first five-and-ten-cent store in Pennsylvania, which swiftly blooms into a worldwide chain. (He becomes known for visiting outlets and attempting to shoplift, to test staff's attentiveness.) The brand becomes defunct in 1997.
1955: Inspired by the success of major department stores' "Dollar Day" sales, Cal Turner opens the first Dollar General Store in Springfield, Kentucky. At the time of his 2000 death, there are more than 4,800 outlets across 25 states.
2006: Family Dollar starts accepting credit cards for the first time, many decades after they're widely adopted elsewhere.
2008: The 99 Cents store adjusts its price to 99.99 cents—rounded up to a dollar at the register. (It boosts revenue, while allowing them to keep the nines in the name.)
2009: In the depths of the financial recession, dollar store chains experience strong sales growth as those around them post declines. Customer traffic increases, and so does their average spend.
2011: The combined number of outlets of Dollar General, Dollar Tree, Family Dollar and 99 Cents Only surpass the total number of Walgreens, CVS, and Rite Aid drug stores.
2015: A bidding war between Family Dollar and Dollar General results in Dollar Tree being sold to Family Dollar for $9 billion.
2017: The Museum of Contemporary Art in Detroit asks more than 100 artists to contribute new works made entirely from dollar store-purchases. Total budget? $99.
2018: Following similar efforts in Texas and Louisiana, the city council of Tulsa, Oklahoma, passed an ordinance to restrict the number of new dollar stores in north Tulsa, and encourage the opening of full-service grocery stores with fresh produce.
2019: Hedge fund and activist investor Starboard Value LP take on a 1.7% stake in Dollar Tree. After nominating seven directors to the board, it begins pushing the retailer to consider selling the Family Dollar business, even at a loss, and tweaking its pricing model to sell items at $1.50 or $2.
Capitalizing on hardship
Opening a grocery store can be an expensive enterprise. Fresh produce is tough to keep fresh, while refrigeration and stock management can make for pricey overheads. But dollar stores are different: scant healthy options means more food products that can simply sit on the shelves until they're gone.
Here's the problem: In many small towns and struggling urban areas, dollar stores have replaced grocery stores. (They sometimes receive tax incentives to do so.) By obliging residents, especially the elderly and those on fixed incomes, to furnish their diet with comparatively expensive, unhealthy options, they further trap them in cycles of poverty and ill-health.
It's bad for the community in other ways, too: dollar store corporate policy often limits how much they can support the community and its sports teams or faith-based organizations, compared to grocery stores. What's more, they employ as much as 50% fewer staff in jobs with few transferable skills. Even the highest salaries are still quite low—a manager might earn a maximum of $40,000—and overtime unpaid and expected. Employees fight back where they can via frequent class-action lawsuits, but it's a losing battle when no other local jobs are available.
To add insult to injury, shoppers often have the false impression they're making big savings. Relatively healthy goods, such as flour or raisins, are usually more expensive by weight at dollar stores than at Walmart or Costco. But because they're sold in smaller bags, they seem cheaper—resulting in customers opting to visit the dollar store rather than their local supermarket.
All this helps to contribute to a permanent underclass. Bad news for the people involved, but great news for the bottom line.
Before it was Kmart, the department store was known as S. S. Krege, for its traveling salesman founder Sebastian Spering Kresge, who invested $8,000 in nickel-and-dime stores in Detroit, Michigan in 1899. By 1924, he was worth approximately $375 million ($5 billion today).
In this 1933 Disney animated short, Oswald the Lucky Rabbit finds himself in a "five and dime" store—the precursor to the modern-day dollar store. He variously finds himself narrowly escaping a brawl; in a position of acute embarrassment; and playing the song "I Found a Million Dollar Baby (in a Five and Ten Cent Store)" to the store's patrons.
Although there are a few similarities between this early iteration and the modern dollar store, there are a few striking differences in this vintage clip. You'd be surprised to find a mangle for sale at Dollar Tree, not to mention sheet music or a Venus de Milo statue. Still, the piles of cut-price crockery are exactly the same.
Big in Japan
You can't shop online at Daiso, Japan's number one discount store, unless you're buying in bulk, but there's fun to be had in cruising the electronic shop floor anyway. That's if you don't have one nearby—and there's a good chance that you might. The shop now has some 7,000 outlets internationally, with its sights set on conquering the whole world.
Unlike Family Dollar or Dollar Tree, Daiso stays away from cleaning products or canned goods. Instead, it stocks impossibly cute lunch-boxes, an array of cut-price beauty and kitchen products, and such Japanese necessities as low-cost origami paper and shrimp-flavoured chips. Marvel at the tiny, perfect sake cups, and consider a move to the Land of the Rising Sun.
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Today's email was written by Natasha Frost, edited by Jessanne Collins, and produced by Luiz Romero.
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