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 Buyers for these stores can often negotiate a deal directly with manufacturers to retail their surplus or outdated merchandise through places such as Dollar Tree and Dealz.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.
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.