What the success of the dollar store says about the American economy
Greg Beato | May 26, 2011 posted on Reason.Com
In 1868, a new kind of store opened at 669 Broadway in New York City and immediately captured the city’s attention. Immense, staffed with attractive young women, it featured silver-plated cake baskets, heavy-plated tablespoons, silk parasols, solid black walnut hat racks, pearl-handled knives—“pretty much everything,” theNew York Sun marveled at the time, and yet whatever one ended up choosing from this great cavalcade of merchandise always cost the same. The enterprise’s name doubled as its universal price tag: It was called The Dollar Store.
Nearly a century and a half later, the novelty of the dollar store, the sense of wonder that attends to how many different ways a few cents worth of raw materials can be processed, packaged, shipped, and sold for a buck, still beguiles us. Earlier this year, the Tennessee-based chain Dollar General exclaimed it has “more retail locations than any retailer in America”—9372 at last count—and is planning to add 625 more in fiscal 2011. Approximately 6700Family Dollar stores now blanket the U.S., and it’s opening new ones at a pace of more than one a day.Dollar Tree opened its 4,000th store in October 2010 and recorded a 12.4 percent increase in sales throughout the year.
Fifteen years ago, there were fewer than 6000 dollar stores in the U.S. Typically, they’ve been cast as capitalism’s consolation prizes, shabby oases of post-modern barbecue sauce and dangerously overachieving candle sets that have sprung up in the sort of retail deserts where even Walmart won’t take root, and their rise is attributed to economic hardship and the need to stretch every penny like a hot wad of Silly Putty. And no doubt value has always been the cornerstone of these retailers—in 1871, when a dollar price point did not yet automatically signify an extreme discount, a New York Timesadvertisement for the city’s original Dollar Store boasts that it is “selling goods for at least one-half what they can be purchased for elsewhere.”
But as dollar stores attract more upscale consumers—Time reports that Dollar General’s “fastest-growing customer segment is households making more
than $70,000”—it also becomes more obvious that consumers shop at these stores not just for utilitarian reasons but also because of how shrewdly they cater to current lifestyles and sensibilities.
In a June 2011 feature for Wired, James Surowiecki writes about how online auctions, widely heralded as the future of retailing just 10 years ago, aren’t even that popular at Ebay anymore. Dynamic pricing was supposed to make consumption more efficient, but we spend time as well as money when we’re shopping, and even in the midst of the recession, time is often the scarcest resource of all. “Why go through an entire auction in order to arrive at nearly the same price you could have set before it started?” Surowiecki writes. In another instance, he quotes Harvard business historian Nancy Koehn: “Does it make sense to spend this much time on an auction when I might not even get the item in the end?”
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