I too was under the impression that there was some kind of clever way these shops operate, based on the title. But the economics are exactly like any other shop.

There’s a good Planet Money on this from NPR. They imply that the real profit is from not stocking fresh goods and other items that 1) spoil, 2) have lower margins and 3) require employees to constantly restock. So they basically sell high-margin goods (negotiated in bulk) with absolute minimum costs. That’s it.

[0] https://www.npr.org/sections/money/2019/04/26/717665452/epis...

I haven't RTFA, but it's always struck me as funny that some of the items at the dollar store are 49¢ at the big box. Stuff like hose clamps comes to mind. You can get quite ripped off if you let yourself think "dollar = cheaper than everywhere else".

I think it's useful information, even if it should be intuitive. I know a number of people who shop at the dollar store because they believe they're saving money. In particular I think it's nice to shed some light on the special arrangements the stores make with manufacturers to produce products that look like the equivalent of what you get in a normal store but only cost a dollar, while in fact containing so little of the actual product that they're a worse deal.

The 'lower total cost, higher unit cost' problem is one of the reasons I love the way the EU mandates advertising prices. i.e. anything sold needs to have the price you actually pay on it (including VAT/other charges), and the cost per unit. (€/l or €/kg).

This saves me an absurd amount of planning/thinking as I can compare an equivalent cost number whenever I see a substitutable product somewhere. Also saves you from being fooled by your own assumptions, like when the unit cost of the largest cereal box is higher than a smaller one.

I wish unit prices were always per the same unit, too. Sometimes I'll see a single pack of something with the price per ounce, and a triple pack with the price per pound (or something).

I thought this was already mandated by US law, but ...

Pound Shops, a similar idea in the UK, seem to have several different economic strategies in every store.

In some cases they are selling (for £1) a product that your supermarket pays 70p for and sometimes sells for £1.50 and other times "discounts" to 75p. If you bought it from the Pound Shop when it's £1.50 at a supermarket that seems like a bargain, if it was 75p at the supermarket it seems like a rip off. But it's the same product either way.

In some cases as you described they have a 300g version of a 450g product, theirs costs £1 and the "ordinary" version is £1.40 from many retailers. So they are more expensive on a "per-unit" basis. But let's face it, you were going to eat the entire product even though the manufacturer says it's for "sharing", so maybe they did you a favour.

In some cases the manufacturer is engaged in simple price discrimination. The pound store has the exact same quantity of the branded product, but it's wrapped with a label explaining that it only cost £1 whereas the version in the supermarket is unlabelled and costs £1.50. The manufacturer guesses that many people who can afford £1.50 will choose not to visit a Pound Shop, so any sales at the lower price are extra sales and don't cannibalise supermarket sales.

In some cases they're End of Line goods. The supermarket doesn't want to stock a product with a finite supply, especially out of season - it looks desperate, but a Pound Shop can put boxes of "Santa Shapes" candy on shelves in January for £1 (original RRP £2.50) and customers will buy them because candy is candy, who cares if it's Xmas themed when it's so cheap? Or after supermarkets pull the £1.85 "barbecue flavour" chocolate assortment you launched because it doesn't sell, bundle them two for £1 at a Pound Shop and they disappear. Do the Pound Shop's customers eat them? Who cares.

The final category that's most interesting to me is bulk electronics. If you stock sixteen different adaptors in an electronics shop, they move so slowly you probably have to charge £2.50 or more for them even though they're quite cheap to make. But a Pound Shop can pick one adaptor they think sells (say, USB A to USB C is plausible) buy an entire container of them, put them on shelves for a few weeks at £1 each, and they vanish. Want that USB A to C adaptor a month later? Too bad, now they have a GU10 LED lamp, and a month after that maybe it's a laser pointer. Could I get these products on Amazon any time? Yeah, but either the postage kills the deal, or it's "free" and the price is higher.

Yeah, but the article provides relevant numbers.

> If they thought they were being taken advantage of or manipulated then poor people wouldn't buy anything from dollar stores

I've seen people (whether they be college students or just people living paycheck to paycheck) talking about how they only have e.g. $5 USD to spend on groceries for the next two weeks (because that's how much they have in their bank account, and that's when payday is).

If your choices are "something you can pay for at the dollar store at a less-than-optimal unit price" or "something you literally cannot buy because its purchase price exceeds the number in your bank account" then you really don't have a choice.

Poor people don't want dollar stores; they just want to survive.

The article kind of contradicts itself by bringing up this point, then later saying that people make a lot of impulse purchases and the average trip costs $16. I don't doubt that your anecdote is true, but it seems to not be the typical case.

That's not a contradiction. A store can have more than one type of customer.

> feels like the article has some anti-capitalism undertones...

What a knee-jerk sensationalist review of the article. It makes a fair point about why some consumers like the stores, and others welcome its convenience. Is that some major controversy? In fact much of the article could be taken as positive (pro-capitalistic) review of their strategy, a case study in making lots of money the old fashioned way.

> "Snap up these items...using their power to strongarm the price down" Strongarm?

> "Count on customers ... not doing the math" with a quote that "admits" this, but not exactly. Messy way to explain it.

> "Center their entire business modal around this dependency" > Maps of low income areas

Meh. Any one of those (cept maybe strongarm) by themselves isn't remarkable. Together, it's reasonable to wonder about anti-capitalism (exploit the poor?) undertones, if you're senstive to that kind of thing. Calling that reaction a "knee-jerk sensationalist review" seems over-the-top to me.

Not disagreeing whether the author hints at some bias with these choice of words, but to interpret this as "anti-capitalist" is absolutely over-the-top. In fact it shows a clear lack of understanding about markets.

Even rich people shop at Walmart.

> But in reality, dollar stores are what poor people want.

No, they really don't. They want high quality goods just like everybody else. Poor people also want food with good nutrition. But they aren't able to afford those things because the modern interpretation of capitalism is "exploit the poor to the maximum possible extent." You can be against this without being anticapitalist.

I often go to a "cheap shit by the container load" retail chain called Action and they are always packed. And all kinds of people go there- Dutch people are infamous for their love of cheap and it's considered a point of pride. Capitalism always wins.