How dollar stores score the highest profit margins

There's a character in my novel Pints Of 'Gansett Make You Strong (or, the Good People) who works at the South Boston Dollar Tree. The narrator — a crotchety anarchist private eye — goes to visit her at work, because her phone's dead, because she can't her bills. At the start of the chapter titled "Kill The Poor," the narrator rants a bit:

The South Boston Dollar Tree smelled like mothballs, citronella, and wet moldy plastic bags. Based on the few similar stores I'd ever stepped inside, this olfactory detail was a conscious design choice, like they were pumping in this revolting perfume to influence their shoppers as part of the decor. It wouldn't surprise me if someone'd done some kind of bullshit marketing demographic research to show that sickly artificial stenches had a positive effect on people shelling out dollars for cheap plastic trinkets.

What I'm trying to say is that Dollar Tree epitomizes everything I hate about America. At least Wal- Mart was carefully curated by some corporate board; Dollar Trees were a crapshoot of poorly-made and mostly unnecessary shit that preyed on the lower classes who thought they were getting a deal paying one hard-earned dollar for eight-hundred plastic forks that broke as soon as they were used. People like Margie Walsh, who made $8.63 an hour to re-stock Jesus Candles, which meant she couldn't even afford to shop at a Wal-Mart even if we had them here. So her $8.63 went right back to the Dollar Tree, to over-processed cans of Vaguely Ethnic Food and hideously decorative plastic cups and maybe, on a good week, a knock-off GI Joe for little Kevin to entertain himself with for three whole hours before it fell apart.

Such was the cycle of the Dollar Tree economy. Nothing that cost a dollar was ever actually a deal. Except for a tallboy of Narragansett at the pub, but that went without saying.

Turns out, that's not even the whole story of the Dollar Tree scam. A new infographic from The Hustle breaks down the economics of the entire dollar store industry — which is apparently even more profitable than Coca-Cola Company, and still growing fast. They do that not only by strong-arming the price of bulk buys, but also by deceiving you on deals. Sure, everything costs a dollar … but you're also getting less of each product per dollar.

For every $1 in sales, Dollar General and Dollar Tree earn an average gross profit of ~$0.30. That's more than rivals like Target ($0.28) and Walmart ($0.24).


Dollar stores also partner with name-brands to create smaller-sized products that fit the $1 price point. That $1 Old Spice deodorant might seem like a good deal. But at 0.8 oz., it's less than one-third the size of the standard 3 oz. stick—and on a per-unit basis, it's significantly more expensive than the larger-sized offerings at other retailers.

And of course, dollar stores are strategically placed in food deserts and low income communities, where that $1 ripoff seems like an even better deal.

More in the video above.

The Economics of Dollar Stores [Zachary Crockett / The Hustle]