Spending

Even 'middle-class customers like the hunt for bargains': How America became a nation of dollar stores

Twenty/20

It's midafternoon on a sunny Saturday in Lake Ariel, Pennsylvania, a tiny town located on route 191 outside of Scranton. The town itself consists of little more than a gas station, a couple of small restaurants, and a post office. But the newest, cleanest, and most bustling business of all is the Dollar General, which first opened in the fall of 2016.

Inside, a middle-aged woman in gray sweatpants and a maroon sweatshirt approaches the counter, greets the cashier, and slides a loaf of bread, a roll of paper towels, and a pack of Skittles in front of him.

The two chat briefly, and the woman mentions how happy she is that Dollar General opened a store in Lake Ariel. This is a common sentiment: Before this particular Dollar General location opened, people would do their shopping at the local convenience store, or they would need to drive to Hamlin, another small town about 15 minutes away, and go to the Weis grocery store.

The Lake Ariel Dollar General, she says, saves her time and money.

And this Dollar General is only one of several in the area — within 10 miles or so of Lake Ariel, there are seven Dollar General locations, many of which opened within the past few years. This has been Dollar General's strategy: Open stores in underserved, often rural areas, filling the void between convenience stores and big-box stores like Walmart.

For rural consumers, who are often cash-strapped and conscious of how much gas they have in their tank, the proliferation of dollar stores — sometimes called variety or discount stores — has been a blessing. Dollar stores are nearby, and they have a wide selection of products, cheap.

This potent blend of convenience and low prices is what has made dollar stores so popular among millions of American consumers.

Another day, another dollar store

Dollar General and Dollar Tree, which includes its subsidiary Family Dollar, are the two biggest players among dozens in the industry. As of the beginning of 2019, there are roughly 30,000 dollar stores nationwide, according to data from the Institute for Local Self-Reliance.

To put that number into perspective, "there are "more [dollar] stores than the top 10 grocery chains in the country combined," says Julia McCarthy, director of the Food-Ed Hub at Columbia University's Tisch Food Center. "More than half of the U.S. population lives within a five-minute drive of a Dollar General."

More than half of the U.S. population lives within a five-minute drive of a Dollar General.
Julia McCarthy
director, Food-Ed Hub at Columbia University's Tisch Food Center

The average dollar store has around 10,000 items on its shelves, according to John Strong, a business and economics professor at the College of William & Mary.

And, as shoppers know, the name can be misleading: Dollar stores take slightly different approaches when it comes to pricing. Some only sell items for $1 while others price the bulk of their products between $1 and $5.

The majority of sales at dollar stores are "consumables" like food, beverages, and toiletries including toothpaste and toilet paper, says McCarthy.

The recession helped dollar stores appeal to new customers

Although dollar stores have been around for some time, they have thrived in the post-Great Recession economic environment. Millions of working-class and even middle-class families deeply affected by the recession started shopping at dollar stores, and that has driven their growth over the past decade.

But the relatively small size of dollar stores compared to big box stores like Walmart is the other key component that's helping them succeed. Dollar stores can pop up in small communities, don't require as much physical square-footage, and need far fewer employees to operate. That gives them an advantage over bigger retailers.

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As Strong puts it, dollar stores looked at Walmart and decided to "go where they ain't," using smaller stores to open in smaller communities.

"They fill a need in providing value in markets that have been historically underserved: rural America, inner cities, poorer suburbs, and metro fringe areas," says Strong. "Dollar stores have played that role in markets too small for Walmart Supercenters."

Quality and price concerns

For consumers, especially those in rural or underserved areas, dollar stores can be a great convenience, with wide selections and low prices. Convenience, though, can come at a cost that may not be obvious.

The quality of the products at some dollar stores can be questionable. After all, what's for sale may be cheap for a reason: Maybe it's less durable, so you'll end up having to spend more soon to buy the same item again.

There have been lawsuits against dollar store chains for selling expired medications, and consumers have also filed class-action lawsuits against dollar stores for selling motor oil that wasn't designed to be used in modern vehicles.

Fortunately, instances such as these have been relatively rare. And the companies themselves say they're doing everything they can to ensure the safety and reliability of their products. "We are extremely committed to product quality, safety, and customer satisfaction," a spokesperson for Dollar Tree tells Grow.

They fill a need in providing value in markets that have been historically underserved: rural America, inner cities, poorer suburbs, and metro fringe areas.
John Strong
business and economics professor, College of William & Mary

In the future, consumers can likely expect to find price increases and more expensive merchandise in their local dollar stores, too, as chains look to expand their reach and customer base. Many products at Dollar General, for instance, already sell for between $5 and $10. There are other chains that are using the dollar store blueprint to take aim at consumers willing to spend a little more, too, like Five Below.

For the time being, though, some chains are sticking at the $1 price point. Dollar Tree still sells everything for $1, though it's experimenting with a "Dollar Tree Plus!" initiative in some stores, in something of a price-sensitivity test for its customer base.

U.S. shoppers love a good deal

Dollar stores play an important role in helping millions of Americans make ends meet. They're cheap, convenient, and have an enormous selection. Just remember to shop smart: Check expiration dates and make sure products not only fit your budget but also your needs.

Remember, too, that you have options. Most dollar stores lack fresh produce, and for some products, it can be cheaper to buy in bulk at a warehouse retailer or big box store. And if you're worried about spending more money than you're comfortable with at a different retailer, experts say there are still plenty of low-cost stores out there where you're likely to find a deal.

"Middle-class customers like the hunt for bargains," says Strong, "be it at Dollar Tree or at T.J.Maxx."

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