There is no more convenient store than a dollar tree store. Even people who don’t have a lot of money can walk into a dollar tree store and find everything from toiletries to canned goods, children’s toys, and school supplies, all for a dollar or less. It’s quicker than a trip to the grocery store, gives you more options than a supermarket, and is a lot cheaper than both.
Both Dollar General and Dollar Tree, the country’s two largest dollar store chains, each had about 15,000 stores in the United States in 2018, and that number has only increased since sales.
For the first six months of 2019, Dollar Tree (which has also owned Family Dollar since 2015) saw gross profit increase by $12.2 million and earned $3.38 billion. Dollar General saw the same results, posting $25.62 billion in annual revenue in 2019 alone.
Each year, these businesses are making bigger and bigger profits, but how is it possible for a business that seems to be giving things away to become a multi-million dollar corporation? The answer is simple: That dollar isn’t always as good as it seems. This is how dollar tree stores make money.
Table of contents
Are Dollar Tree Stores Always Better Deals?
According to an analysis by The Guardian and The Washington Post, paying $1 for a 16-ounce bottle of milk at a dollar tree store is equivalent to paying $8 for a full gallon, which is more expensive than the fancy organic milk stuff at Whole Foods.
Similarly, the 1-1-Raurin pocket in the dollar tree store weighs only 4.5 ounces (128 grams), while a 72-kilogram Bag (2kilogram) of a BigBox bearing costs $ 10.50 or 52 percent less, even though dollar stores are crammed floor to ceiling with items, the typical dollar tree store only has 10,000 SKUs (individual item codes called “stocking units”), while the average Walmart has nearly 90,000 SKUs.
These $10,000 store items are selected for maximum profit. , emphasizing long shelf life, off-brand brands, and small packaging.
Dollar tree stores that make money don’t require many employees to function, which in turn keeps overheads significantly low.
A typical dollar store employs eight to nine people, compared to 14 employees at a similar-sized independent grocery store. Salaries at dollar tree stores are competitive with big retailers.
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The Future of Dollar Tree Stores
However, not all dollar tree store chains have been very profitable, and the dollar store industry is evolving.
Dollar Tree announced in March 2019 that it would close 390 Family Dollar stores, remodel another 1,000 to include more freezer and refrigeration departments, and even sell alcohol. Sales at Family Dollar stores have slumped compared to Dollar Tree and Dollar General, which continue to thrive even in a strong economy.
Dollar Tree is the only major dollar store brand stuck to its original pricing policy of selling almost anything for a dollar.
A group of activist shareholders has been urging Dollar Tree to change its policies, citing inflation and the gradual increase in the cost of producing these $1 products. So far, Dollar Tree executives are sticking to their courses (prices).
As dollar stores continue to expand their offerings and compete more directly with grocery stores, drugstores, and large retailers, they could evolve to look and feel more like mini Walmarts than bloated warehouses.
How do Dollar Trees Make Money?
While the prices of everything, from slats to cinema cards have been inflated in recent years, the shops of dollars are somehow around. but there’s enough on the shelves to attract bargain-seeking shoppers.
This begs the question: How do dollar tree stores make money when every other retailer seems to be raising prices?
The truth is, the bargains at dollar tree stores aren’t always as generous as they seem. Many of the $1 items sold in these chains are less affordable than the larger, more expensive ones. —Versions are sold in grocery stores.
For example, a $1 16-ounce bottle of milk sells for more than $0.06 per ounce. The average US milk price in December 2018 was $3.27 per gallon [PDF], or less than $0.03 per ounce.
These tricks are even harder to spot with products like aluminum foil, which can be sold in 15-foot rolls for $1 at dollar stores and 75-foot rolls for $4 at major chains but are available in boxes of the same size. Price tags to apply the illusion of value to everything in their inventory, dollar stores can generate a profit that can be higher than stores like Walmart.
Of course, there are Dollar tree Shop customers who know that with a little more money in larger amounts they have more value in the long run. But this is not feasible for everyone; When shoppers only have enough cash to get them through the week or even the day, dollar tree stores are an enticing option.
That brings us to another strategy these companies employ to stay in business: targeting low-income communities.
Dollar tree stores intentionally establish themselves in areas where ready access to cheap, non-perishable food is not just a convenience but a necessity. Many of these communities are considered “food deserts,” or places isolated from supermarkets and other stores selling fresh, nutritious food.
Sometimes, dollar tree stores help create food queues by drawing customers away from local grocery stores and independent businesses until they’re the only game in town.
Some cities have even begun passing laws to limit the expansion of Dollar Tree to prevent them from becoming the primary food source for low-income families.
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How To Start A Dollar Tree Store
Start a Dollar tree Store by following these 10 steps:
- Plan Your Dollar Store
- Incorporate Your Dollar Store
- Register Your Dollar Store for Taxes
- Open a Business Bank Account and Credit Card
- Establish the Bookkeeping for your Store
- Get the necessary permits and licenses for your dollar tree Store
- Get your dollar tree Store Insurance
- Brand your Store
- Build your dollar tree store’s website
- Set Up Your Business Phone System
You’ve found the perfect business idea, and now you’re ready to make it happen next step. Starting a business is more than just registering with the state. We’ve put together this simple guide to starting your dollar store. These steps will ensure your new business is well planned, properly registered, and legally compliant.
Dollar Tree is classified as an extreme discount store. It claims it can do this because its buyers “work very hard to find the best bargains” and it has “great control over the enormous purchasing power at dollar prices”. Its prices are primarily designed to attract economically disadvantaged customers, but it has also become popular with immigrant communities.
Family Dollar Offer
On July 28, 2014, Dollar Tree announced that both parties had reached an agreement to purchase Family Dollar for $8.5 billion-plus the purchase of Family Dollar’s current $1 billion of debt met and approved.
After the reported deal closed, Dollar General entered the bid on August 18, 2014, with a bid of $9.7 billion, outbidding Dollar Tree.
On August 20, 2014, Family Dollar rejected Dollar General’s offer, arguing that it was not a pricing issue but antitrust concerns that convinced the company and its advisors that the transaction could not be completed on the proposed terms.
Family Dollar’s board of directors has been addressing potential antitrust issues arising from a deal with Dollar General since the beginning of the year.
Dollar Tree Stores in Canada sells items for CAD 1.50 or less. On October 11, 2010, Dollar Tree announced the acquisition of Dollar Giant, originally founded in 2001 in Vancouver, Canada, for US$52 million.
At the time of the acquisition, Dollar Giant had approximately 85 retail locations in British Columbia, Alberta, Saskatchewan, and Ontario.
Approximately 30 of its retail stores are located in British Columbia, making it the second-largest dollar store chain in that province.
It was the fourth-largest dollar store operator in Canada. Since then, Dollar Tree has changed the name of all of its Dollar Giant stores to Dollar Tree; These were the first retail stores outside of the United States to be operated by Dollar Tree.
The company now operates 227 stores across Canada, focused on Western Canada and Ontario.
Dollar Tree Canada’s marketing team is based in Mississauga, Ontario, while corporate headquarters remain in Burnaby, in the Vancouver area.
What to Buy at Dollar Tree Stores
- Stationery: Greeting cards, wrapping paper, paper plates, tablecloths, streamers, and party supplies are some of the best $1 deals. The quality may not be that high, but the difference is barely perceptible, and probably does not matter, for disposable items that are started after use. Plastic holders for organizing or storing particulars are also of good value. Just keep in mind that a lower price tag can mean thinner plastic, so it might not be as durable.
- Travel size toiletries: Travel-size branded toiletries that you can pack in your carry-on, like toothpaste, deodorant, mouthwash, soap, and shampoo, are often cheaper than at big retailers and drugstores.
- Glasses: Make sure the sunglasses you buy point out that you provide UV protection.
- Home pregnancy tests: According to McCrohan, home pregnancy tests are one of the best sellers in dollar stores. The Food and Drug Administration regulates home pregnancy testing. So if you buy one from a branded store, you can be sure it’s legitimate. Easier to use or display results faster, but Dollar Store Kits do the same job.
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What Not To Buy
- Toys: As cheap can mean “cheap”: Many dollar toys are off-brand. They break easily, can have small parts that can be a choking hazard, and don’t last long. Some dollar stores may not receive payout notifications. Coloring books and cardboard puzzles are fine, but you don’t want your kids to fall apart when their yo-yos get tangled after three spins.
- Everything with a plug: Unbranded electronics can be risky as their supply chains are not as consistent as the branded ones you find at other retailers. Power strips and chargers are likely cheap and can damage your devices.
- Batteries and battery-powered items: If the packaging is not labeled, batteries are a risky purchase. They may have been on the market for a long time and/or be leaking.
- Sunscreen: Don’t get burned twice. If the expiration date is short, leave it on the shelf. Sunscreen ingredients have an expiration date, and while expired sunscreen won’t harm you, it may not be as effective.
- Pet food: Water bowls and pet toys are fine, but all the experts agreed that pet food is on their “do not” list.
- Health and beauty products: The general rule is that you should be very careful when ingesting or applying it to your skin. The burn products may contain larger ingredients or diluents (such as shampoo and conditioner) to keep the costs low.
Conclusion
Some things in the dollar tree store aren’t worth a dollar; sometimes you can find the same item cheaper elsewhere.
It can be tempting to buy whatever you like at the dollar tree store because it feels cheap. But sometimes, if you take a little more time to compare prices, you can find the same item cheaper elsewhere, especially if you buy in bulk.
Don’t assume that the dollar tree store is always the cheapest retailer. After all, they are just trying to monetize their business like everyone else.
References
- mashed.com – How Dollar Stores Really Make Their Money
- money.howstuffworks.com – How Do Dollar Stores Make Money?How Do Dollar Stores Make Money?
- wsj.com – How Dollar Tree Sells Nearly Everything for $1, Even When Inflation Lurks
- rd.com/article/how-do-dollar-stores-make-money/
- mentalfloss.com – Making a Buck: How Do Dollar Stores Make Any Money?
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