This Is How Dollar Stores Actually End Up Making Money

Shopping at dollar stores is awesome. You need something cheap, you run in, you grab it and you’re on your way home, with tons of money still in your pocket.

But have you ever looked around at all those $1 price tags and wondered how this place even stays in business? They don’t ever seem to raise their prices to keep up with inflation like other businesses do — what gives?

The answer is actually surprisingly interesting. You see, dollar stores aren’t actually the best places to score deals on household items. This is because it’s almost always cheaper to buy something in a large quantity or supply, like what you’re able to find at Sam’s Club or Costco.

Though dollar store prices may seem cheap, that’s because you’re only getting a tiny amount or quantity of a product. The stores capitalize on this higher per-unit cost.

This becomes even more confusing to suss out when a small amount or quantity of a product is sold in the same size box or container as that of a large quantity.

A 15-foot tube of aluminum foil sold at a dollar store comes packaged in the same size box as a 75-foot roll.

All of this makes the dollar store strategy feel kind of icky.

Why?

Because some people can only afford to buy tiny quantities of things at a time. If you’re poor or just barely making ends meet, you may have to buy just a few rolls of toilet paper at a time because you can’t afford to spend $25 on a jumbo pack at Sam’s Club, even though that jumbo pack is cheaper when you break down the cost per roll.

What’s your favorite way to save money while shopping for groceries or household items?

We’d love to hear from you! Let us know in the comments!

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Dollar Stores Really Do Make Money

It may seem impossible that a store that offers pretty much everything cheaper than anywhere else (if not for an actual $1) could be a profitable business.

Dollar stores (to be clear, we’re talking about the category of stores “dollar stores,” not the chain of dollar stores called “Dollar Store”) have been around for decades, but after the recession in 2008, more and more people across all income levels began to patronize them.

“In general, dollar stores provide great value,” explained Meaghan Brophy, a retail analyst for FitSmallBusiness.com. “But as many items are custom-made in smaller sizes by manufacturers for dollar stores, shoppers need to compare the price against weight, length, and size,

Given that you can find them in pretty much every town, though – there are 15,000-of them across the U.S. –  they’re obviously turning a profit.

But how?

Darya Minovi, a policy associate at the Center for Science in the Public Interest, can tell us at least part of the story.

“Dollar stores are able to profit on slim margins, in part because operating costs are kept low by employing only a handful of people to stock aisles, and by limiting the amount of cold chain storage in their stores (which is necessary for fresh foods like produce).”

Basically, they take care when deciding what to stock and how much in order to cut down on operating costs in their stores –  which explains why you’re pretty much always on your own when it comes to finding something in their jumbled aisles of canned vegetables and paper goods.

There’s more to the equation, though, says Minovi.

“Dollar stores in the United States typically seek to open locations in economically disadvantaged communities that lack a full-service grocery store. It’s worth noting that consumable goods were nearly 78% of Dollar General’s total sales in 2018. Unfortunately, the food on offer is largely calorie-dense and nutrient-poor, so this model depends on selling nutritionally poor food and beverages to mostly low-income customers.”

Which is all to say that dollar stores, though they serve the needs of certain communities, are not without their issues.

One of those issues, though, isn’t turning a profit.

Just so you know.

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