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During the last decade, the dollar stores were relatively steady in the middle of a shopping apocalypse. In the last few years in the US and North America, the dollar store market has expanded exponentially. Now there are more US dollar stores than the total outlets of McDonald's and Starbucks.
Why do dollar stores challenge the odds?
A detailed analysis of these businesses reveals many elaborate tactics that have led to huge success in a very competitive retail segment.
Usually, the dollar shops place their shops in lower-income districts and rural cities. Most of such shops are in areas of fewer than 20,000 residents. The dollar shops often concentrate on places with small competition to improve their prospects of growth. For example, Dollar General seeks to find shops in locations where major supermarkets or food outlets are not within 15-20 miles.
The places where dollars are rising are also known as "food deserts," markets where customers are far away from a food store or a large box chain such as Walmart, but they need to purchase household goods and food at a reasonable price. Over the years, this tactic has enabled dollar stores to achieve a greater share of the food market.
Do dollar shops use clever rates or misleading prices?
In fact, not all goods offered in dollar shops are the cheapest. Most items available in dollar stores have a cheap price but in unusual packaging of small sizes. It might make things seem like a buyer makes a deal if the unit's price is really higher than what is offered in another shop.
There are still several "dollar" shops where the price of products is above one dollar. Dollar General and Family Dollar, for example, offer products up to $10. This sort of pricing and promotion plays into customers' hands with small budgets that try to save as much as possible.
The retailers from Amazon to Walmart realize that for success, it is vital to selling food. Jeff Bezos also claimed that Amazon wants to work out how to market food to become a $200 billion retailer. Food costs are the third highest expense behind living and transportation in the United States. If a dealer can sell food, he can rely on a constant traffic flow to his shops every week. That is why Canadians market-fresh food goods in pharmacies such as Shoppers Drug Mart.
The grocery amount sold in dollar stores has risen regularly over time. Only 23% of customers shopped for food at dollar-stores daily in 2014. By 2019 this number doubled to 52%, which is more than half of all shoppers. It ensures that buyers buy more frequently in a shop such as Dollar Tree than in Target. It suggests a change in purchasing habits.
With dollar shops expanding fast across the US, they created neighborhoods where dollar shops flourished, but there was no full-service food. The inability to compete for only enhanced dollar stores performance. As in small towns and urban areas, the dollar stores make full-service grocery shops close. And their tactic of saturating cities with numerous outlets stops new groceries and other small industries from rooting and rising.