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Did you ever wonder when "dollar stores" began and how they make a profit?
Did you ever wonder where "dollar stores" began and how they make a profit?
By David McClelland
Did you ever wonder where "dollar stores" began and how they make a profit?
I am always amazed at what one can buy for a dollar in these stores when we must pay much more for seemingly the same merchandise elsewhere. Just how do they do it?
First, lets look at the history of the "dollar" store. The earliest one seems to have been, Family Dollar Stores, founded in 1959 by 21 year-old, Leon Levine in Charlotte, North Carolina. Levine was from a retailing family. His father, Harry Levine, operated a department store in Rockingham, North Carolina and, when Harry died in 1947, Leon and his brother inherited the store. Leon thought that he could make a more profitable business out of stores that sold all merchandise at a low price. Today, his chain, Family Dollar, comprises over 6,600 stores nationwide. Other large U.S. dollar store chains are Dollar Tree, Dollar General and Fred's Super Dollar. They all appear to be successful.
That explains where such stores originated, but how do they manage to make a profit? The owners have to build or lease large stores (they average 20,000 square feet), buy the merchandise, play labor costs, pay property taxes (either directly or indirectly), pay state and federal income taxes and pay all of the other costs associated with doing business. All of those costs wouldn't seem to leave much for profit.
I spoke with a manager of one such store and he told me that he is able to make a nice profit because he sells every product at a 50% mark-up. That means that he buys in such large quantities that he consistently pays at least 50% less for each item than the $1 that we pay when we buy it from him. He said that other cost-savings are that the stores are strictly self-service, have few employees and that they don't advertise. One usually sees no more than two or three employees in dollar stores.
Dollar stores have been around for over 50 years. They appear to be destined to be around for quite a while longer. And, if you decide to shop in one, you won't have to go into debt or go broke filling your bag or basket. Now, you probably know more than you did about dollar stores.
By David McClelland
Did you ever wonder where "dollar stores" began and how they make a profit?
I am always amazed at what one can buy for a dollar in these stores when we must pay much more for seemingly the same merchandise elsewhere. Just how do they do it?
First, lets look at the history of the "dollar" store. The earliest one seems to have been, Family Dollar Stores, founded in 1959 by 21 year-old, Leon Levine in Charlotte, North Carolina. Levine was from a retailing family. His father, Harry Levine, operated a department store in Rockingham, North Carolina and, when Harry died in 1947, Leon and his brother inherited the store. Leon thought that he could make a more profitable business out of stores that sold all merchandise at a low price. Today, his chain, Family Dollar, comprises over 6,600 stores nationwide. Other large U.S. dollar store chains are Dollar Tree, Dollar General and Fred's Super Dollar. They all appear to be successful.
That explains where such stores originated, but how do they manage to make a profit? The owners have to build or lease large stores (they average 20,000 square feet), buy the merchandise, play labor costs, pay property taxes (either directly or indirectly), pay state and federal income taxes and pay all of the other costs associated with doing business. All of those costs wouldn't seem to leave much for profit.
I spoke with a manager of one such store and he told me that he is able to make a nice profit because he sells every product at a 50% mark-up. That means that he buys in such large quantities that he consistently pays at least 50% less for each item than the $1 that we pay when we buy it from him. He said that other cost-savings are that the stores are strictly self-service, have few employees and that they don't advertise. One usually sees no more than two or three employees in dollar stores.
Dollar stores have been around for over 50 years. They appear to be destined to be around for quite a while longer. And, if you decide to shop in one, you won't have to go into debt or go broke filling your bag or basket. Now, you probably know more than you did about dollar stores.
posted by David McClelland at
8:31 AM
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