How Do Dollar Stores Make Money?

If you’re the type of person who’s thrifty with your purchases, then you may have encountered dollar stores before—small retail outlets that sell most, if not all, of their products at a flat rate of US$1 each. No matter what it is, whether it’s a food product or personal hygiene item, it costs just one dollar. Now, you may be thinking about how great of a deal that is, and how much money you might be saving if you start buying your groceries from dollar stores exclusively.

But are you really saving that much more money by buying from dollar stores? Is it actually worth buying from them instead of from groceries or supermarkets? The answer to those questions can only be answered by finding out how dollar stores actually make money, and we’ll explain how they do just that in this article.

Dollar stores resells their supplies in much smaller quantities than retail.

Now, it’s true that any retail store buys their supplies wholesale, before reselling them in retail-friendly packages at higher but reasonable prices. Let’s say you wanted to start selling customized pins as a small retail business. You’d start by ordering cheap lapel pins in bulk, and then sell them one by one to your customers, with each lapel pin selling for considerably more than its original cost. This ensures that you not only break even with your original investment, but also earn a healthy profit off of each sale.

Dollar stores, on the other hand, do the exact same thing, except that they sell the product at a considerably lower quantity than it usually would be sold in retail. Going by the lapel retail business example, if it had suddenly converted into a dollar store, every pin you’d sell would only cost one dollar—but instead of that one dollar buying an entire pin, it would only be worth a fraction of an entire pin.

Dollar stores do this for every product they sell. Whether it’s shampoo, powdered coffee, or even aluminum foil, they split up each product into smaller quantities, and then sell each fraction for a dollar. While this may still seem to be quite a deal, the fact is that even if you compared it to the same product being sold at a supermarket and in the same fractioned quantity, invariably you’d be spending more at the dollar store than at the supermarket.

Dollar stores sell a lot of imitation goods and generic brands.

Another way that dollar stores make money is by selling imitations of branded goods, as well as “nameless” generic brands. These are essentially inferior copies of goods that have been made much more cheaply, and with a lot of corners cut. These can range from clothes, gadgets, and toys to even foodstuffs. Since they cost very little to make, they also cost very little to get in bulk, allowing dollar stores to stock them en masse and sell them at a bigger profit percentage.

Dollar stores are also known to sell “generic” brands of goods. These are a bit more reputable and of better quality than imitation goods, but still inferior to their branded counterparts. The only problem here is that they usually have zero branding or even packaging, which really makes purchasing them a gamble sometimes.

Dollar stores are always kept small and minimally staffed.

Ever notice how dollar stores feel really cramped, and there’s often only a small handful of people managing it at any one time, no matter how crowded it gets? What about the products in the shelves, do they always look disorganized and unclean? That’s another way that dollar stores make money—keeping overhead costs low. The smaller the space it has to rent and the fewer employees it has to pay wages to, the bigger the slice of its revenue pie it gets to keep.

Dollar stores can save you money, but it’s not as much as you think

Now that we know how dollar stores make money, is it really worth buying from them? The answer is that it depends on what you’re trying to buy and how much of it. For example, if you want to try out a new shampoo or a new detergent, but you don’t want to spend the money buying an entire bottle, then you can get a much more affordable “trial purchase” at the dollar store.

Same goes for anything that isn’t a consumable: do you just need a specific quantity of a material for a project or chore? Then buy it at the dollar store. Sure, you’re paying a bit more by volume, but you’re cutting down on wastage by only getting what you need.

For anything else, though, you’re much better off buying at grocery stores and supermarkets. Just keep watch for promos, sales, and coupon drives to really stretch your budget. There’s a lot more legwork involved, but it really does pay off in the end.

Login/Register access is temporary disabled