Why Dollar Stores are doing pretty well in a digital world

Next time you pass a Dollar Store in the US (including Dollar Tree and Dollar General) observe the parking lot. In towns rich and not so rich you’ll find that the parking lot is full most of the time.If you have not gone into a Dollar Store recently – do so and then compare the merchandise to Walmart. For a dollar the quality is not bad.

Dollar Stores took off after the 2008 recession and there are more Dollar Stores than McDonald’s in the USA.  Between Dollar Tree and Dollar General there are 30,000 stores and these are very densely seen in the mid-west and the farmlands of middle America.  A recent article “Sign of hope or worry- when the dollar store comes to town”  describes the mixed bag that these stores are for local communities.

And here is our take on the success of the dollar store model in the USA.

  1. What you can buy at Dollar Stores: There is  a  list of (low risk) items like decorating paper and a gift bag that you can buy at a Dollar Store. In fact here is a list of recommended 21 items from money talk news.  If you are wondering about buying food and over the counter(OTC)  medicines from the dollar store – they do seem legitimate brands and the only thing to watch for are the expiry dates. See advice from Quora about buying food from the Dollar Store. One community downside is that  the Greeting Card neighborhood stores are dying out  just as  bigger stores with retail space for these items is cutting back.  On the food front Dollar Stores have started fresh produce and reports indicate that the quality is as good as supermarkets.
  2. Easy location: Dollar stores tend to be in  easily accessible locations  but generally not too near a Wal-Mart or Target. In their product assortment, the risk per item is only a dollar so the consumer tends to feel that they can’t really loose.
  3. Once inside – you tend to pick up things: Once inside the store searching and finding one item you tend to pick up more items. Most customers seem to be checking out with 5-6 items and spending at least $10 each.
  4. The core target market: According to one estimate  the core target market were families earning less than $35,000 and on some form of Government assistance. However, more affluent folks in the neighborhood seem to be flocking to the dollar store. This does not help the local grocery store or the stationery and gifts store because they simply cannot compete with the buying and logistics strengths of the dollar store industry.
  5. Bottom of the pyramid focus :   Bottom of the pyramid  (BoP) is a concept  used to understand  lower income market segments in developing countries.The Dollar Store industry is sharply focussed on the US Bottom of the Pyramid market.Given the core target market of the dollar store industry certain products seem to have high margins. You get the picture when you see one roll of toilet paper sold for $1.

For the consumer and the Dollar Store franchisee the Dollar Store is a win for many products. And the dollar store industry seems to have found a niche in brick retail that Amazon can’t touch.

For the Dollar Store consumer is unwilling and  sometimes unable  to pay shipping or buy an Amazon prime membership.  Amazon too recognizes this and their One Dollar Amazon  Items page does not really have many one dollar items. Similarly Walmart does not have a  $1 aisle.

The Dollar Store industry model seems to be working against big online stores like Amazon and big brick retail  like Walmart.

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