Dollar stores may seem too good to be true, but it really comes down to a case-by-case basis. In some cases, you should definitely shell out a few more bucks on a better brand name, but there are some items that are fine to buy at your local dollar store. How do they manage to offer such low prices and still make money? There are a lot of reasons for this, but it's pretty clear they know what they're doing, as dollar store chains are constantly expanding. Let's take a look at the real reason why food at the dollar store is so cheap.
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00:00How are dollar stores able to sell food for so cheap and still turn a profit?
00:04The answer to that question is a calculated formula that dollar stores have devised to
00:08keep prices low, and we're going to break it down.
00:12Location is the name of the game in business, and if a company wants to be in the busy part
00:15of town, it's going to cost them.
00:17However, it's not uncommon to see dollar stores in lower-income sections of a city, or in
00:21a totally rural area.
00:22It's a smart business move, and choosing to operate in areas that Target, Walmart, or
00:26Whole Foods won't bother to go has proven highly effective for the growth of dollar
00:30stores.
00:31Opening and operating in these areas is simply less expensive, and this helps keep prices
00:35down.
00:36Many dollar stores don't buy the land their stores are on, either, which means that if
00:39they're not doing well, they can just pick up and move.
00:42If a dollar general can keep the lights on and skip out on the pricey property taxes
00:45that a Publix is going to pay, it's going to be able to sell its food for much cheaper.
00:49Yes, you'll find nationally known brands that you're familiar with in the dollar store,
00:54but you're also likely to see a lot of brands that you've never seen in Walmart or other
00:57grocery stores.
00:58This is because many of the brands on the shelf are the dollar store's own brands.
01:02By going the private route, dollar stores are able to have lower margins, since they
01:06don't have to deal with buying from a major label.
01:08Dollar General, for example, can cut back on buying peanuts from Planters and coffee
01:11from Folgers by offering these goods under its own Clover Valley label.
01:16Dollar General CEO Todd Vos said that the store's own private brands were, quote,
01:19"...an important part of our strategy in driving sales."
01:22And because they cost dollar stores less money, they're often priced considerably lower than
01:26name brand products.
01:27Plus, according to Fortune, Dollar General sells no more than 10,000 products in its
01:31stores, while a Walmart might stock ten times that number.
01:34By selling a limited selection of popular national brands, dollar stores have a much
01:38smaller inventory to keep track of and can maximize their smaller space.
01:42Are you sensing a theme here with dollar stores in regards to keeping things small?
01:46Well, that's also going to factor into those super cheap, only-a-buck prices you're getting
01:50on food, too.
01:51If you want a jumbo-sized bottle of barbecue sauce, then hit up a Sam's Club.
01:54However, if a 10-ounce bottle will do, then your local dollar store has you covered.
01:58Dollar stores like Dollar Tree may offer not just fewer varieties of a product, but often
02:02smaller sizes than what you might normally find at a supermarket.
02:06To some, these might seem like travel-sized portions, but according to Fortune, the stores
02:10are going after only what customers can afford at the moment.
02:13But there's a catch.
02:14When compared to the size of products that a shopper might find in a grocery store or
02:17Walmart, the dollar price doesn't always translate to a good deal.
02:20For example, ABC Action News found that buying a box of Ritz crackers at both dollar stores
02:25and then at Walmart cost $2.50, but the dollar store boxes contain three ounces less.
02:30The same often happens to be true for other foods like milk, flour, and chips.
02:34One might assume that if all the stuff in your basket are one dollar each or just a
02:38few bucks more, you're probably not getting very good quality.
02:41And yes, in some cases, the food at a dollar store can be pretty bad.
02:44Sometimes you just get what you pay for.
02:46I wish to complain about this parrot, what I purchased not half an hour ago from this
02:50very boutique."
02:51However, it's safe to assume that a can of Campbell's chicken noodle soup is going to
02:55taste the same whether you buy it at Dollar General or Kroger.
02:58So it is possible to make a solid week's worth of meals from groceries purchased at a dollar
03:01store, and not find yourself constantly reaching for the Pepto Bismol.
03:05And there's more good news on this front, too.
03:07While some dollar stores are going to have a better food selection than others, Dollar
03:11General did announce plans to expand its fresh produce availability to 450 of its stores
03:15beginning in 2019.
03:18Dollar General and other dollar stores are growing at a rapid rate, and because of this,
03:21they can often snag really good bulk deals from national brands.
03:25According to Fortune, brands like Coca-Cola and Hershey didn't always pay much attention
03:28to the dollar store segment of the grocery business.
03:31But with the massive growth of small box stores, national brands are now ready to play ball.
03:35This means that they'll offer dollar stores those smaller-sized products, and as well
03:39as higher-quality point-of-sale displays that were once only for higher-end retailers.
03:43Because of their buying power, dollar stores can convince brands like Campbell's Soup
03:47to make a specially-sized can of tomato soup that can be bought at a low bulk price.
03:51And other stores can't compete.