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How do Dollar Stores Stay in Business?

Dollar store owners save money by ordering in bulk.
Some dollar stores survive by being in a place with high traffic, like a shopping mall.
Dollar stores typically have few employees than regular stores.
Agreeing to absorb shipping costs can lower wholesale prices paid by dollar stores.
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  • Written By: Michael Pollick
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 November 2014
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Dollar stores are outlets which offer a variety of merchandise for deep discounts, even for recognizable name brand items and clothing. All of the merchandise offered in them is one price, generally 99 cents or a dollar.

But how do dollar stores stay in business considering the incredibly low retail price for their offerings? The truth is that some have indeed gone out of business or have consolidated with larger companies to survive. Others continue to do well, primarily because of high consumer foot traffic in a shopping mall or strip mall with a popular discount store anchor such as Wal-Mart or Target.

One key to a dollar store's survival is the power of buying in bulk. Manufacturers of less expensive consumer items such as plastic toys, party supplies, paper goods and snack foods often have a problem with surplus inventory. Buyers for these stores can often negotiate a deal directly with manufacturers to retail their surplus or outdated merchandise through places such as Dollar Tree and Dealz. The wholesale cost per item can be slashed to literally pennies if the buyer agrees to accept bulk shipments or absorb shipping expenses.

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Individual dollar store owners can order their own merchandise through brokers who act as middlemen. Certain items such as name brand beverages or foods may cost nearly a dollar wholesale, but they are often used as loss leaders to encourage customers to purchase other items with a much more profitable mark-up. Few customers ever purchase strictly the items on their original shopping list, so the store profits from impulse shopping as well.

Dollar stores also stay open because of lower overhead and salary costs. Employees are often cross-trained to handle a number of duties, sometimes at the same time. A cashier may also be asked to stock shelves, receive shipments, perform inventory counts or any other duty assigned by the store's manager. The manager may also have to perform many duties at once, including ordering new stock and covering for occupied employees. Owners may also save on overhead costs by renting space in less-desirable locations or keeping shorter hours of operation than other retail outlets.

Another reason dollar stores remain in business is niche marketing. When customers need inexpensive party supplies or party favors, these stores generally offer a decent selection of merchandise for far less than an equivalent retail store. Parents shopping for treats or small toys for their children can save significant amounts of money by shopping at them. Holiday specials also attract customers who want to find unusual items not generally carried by retail stores. Gardeners and home decorators can also find inexpensive but decorative items suitable for everyday use.

Some dollar stores fail because the quality of the merchandise is not acceptable to customers, while others suffer financially when a larger discount store opens nearby. Those that do remain in business have enough sales volume to cover the cost of shipments and are located in areas where the economic demographics support the need for a deep discount retail outlet.

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anon253174
Post 13

I hope no one buys the junk pet foods in dollar stores.

anon108408
Post 12

No one deliberately sells outdated products. It usually is stockroom overstock that fails to be rotated. What surprises me are the idiots who think they hit the lottery when they find something outdated. Do you check the dates on your milk when you buy it?

anon18442
Post 11

Re; out of date food - first the law says food must be dated, not that it can't be sold. It is up to the consumer to read the labels. Second, out dated food usually is just not as good; it is not automatically "dangerous to consume." It might be, but think about this: If food is good until Sept. 30, 2008, it is not "safe" Sept. 29 and then "spoils" on Sept. 30. It usually is just better consumed before 9/30. Also, food didn't used to have expiration dates at all. Most canned food is actually good for several years; some indefinitely. But to be completely safe, I discard all canned goods after one year no matter what the label says.

anon18441
Post 10

Another way dollar stores stay in business is offering things of less than a dollar value for a dollar. Example - index cards can usually be purchased for 69 or 79 cents but of course, at the dollar store they are a dollar.

donetsk
Post 9

i know that dollar store toys are pretty cheap for the most part...but they're only a dollar! that's the beauty of it. kids lose interest in toys so fast (even the expensive ones), so i don't feel too guilty about getting them a toy at the dollar store whenever we go. my big concern these days is if they have too much lead in the paint!

anon16814
Post 8

I have bought a few toys for my daughter at a dollar store and more often than not, the toy breaks after one or two uses. In the end, I spend $5 on 5 toys that break where I could just buy a $5 toy that lasts. Mostly they are good for party favors and stationary. I have also bought paint from them that was dried up.

anon11283
Post 7

I love the dollar store. Whenever I am in a new community I always visit the local dollar store. I have been able to purchase some outstanding bargains.

Researcher
Post 6

Dollar stores can stay in business because mixed in with brand name overstock items, that you can check prices elsewhere, are other items that should sell for less than a quarter. They are all marked one dollar.

When you include inventory and indexing costs an auto you can buy new for $20,000 might be $60,000 if you bought all the parts in individual bags each with it's part number and shipping packaging.

It costs less to sell brand name left-over items at a loss per item than to pay for shipping or storage. This is particularly true for items that have expiration dates or that will appear shopworn from loose handling. Manufacturers have estimates for these losses and include a markup factor to account for it.

The telephone was at one time the only thing you could buy all the parts and assemble or buy the entire working phone for the same price.

anon11141
Post 5

Why are Dollar stores allowed to sell out of date food? I have seen many food items that are dated 2006. If it isn't dated don't buy it.

Flywheel1
Post 2

When I need a supply of reading glasses I get them at the dollar store rather that paying ten bucks a pop elsewhere.

somerset
Post 1

Every now and then I check out a dollar store, and find some handy items. For instance I have bought plastic containers for storage, notebooks, or because I like plants, I buy small potted plants that after a little time and care are not so small any more, and all for just 1$ each, not a bad deal.

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