Enduring business models in competitive industries exist for good reasons. Dollar stores provide an important option for customers chronically short on cash.
Thanks for sharing the dollar store field trip report, an interesting read.
do you happen to know if Stanley's dollar stores are also reasonable store choices for folks from neighboring towns? if so, do you have an estimate how many towns (their population)?
Asking as I'm doing some work on discount stores recently, with a town of 1.7k population, math is almost impossible to support 2 dollar stores + 1 grocery store.
I think it would pay to see what a truly magnificent dollar store business could look like. Look at Dollarama in Canada. Their marginal numbers blows the US dollar stores out the water, i.e. Dollar General, Dollar Tree, Five Below.
I'd love to read your thoughts on this if you do look at Dollarama's 10k.
I grew up in the middle of America, a small rural town with 4,300 people. We had 3 Dollar General's and a locally owned grocery store. The closest Walmart was a 30-minute drive, and the nearest Costco was 2.5 hours away. I would say you are spot on in your analysis of the typical DG shopper; kids looking for a cheap snack and low-income families who need to put food on the table for the next few days, until they get paid again. The local grocery store had a much larger selection, but given the circumstances, lack of scale, limited competition for fresh items, etc. the prices were out of reach for at least half of the households in town. DG has since closed 1 of the locations, but the other 2 are going strong. I understand all the shortcomings of the business, but the reality is that in many small towns across America, this is the only affordable option.
That was a good piece. People who talk about make economically rational decisions rarely seem to consider circumstances much different from their own, either upmarket or downmarket. I remember a New York Times article on check cashing places and the people who use them. One guy explained it nicely. If he spent $2.99 to cash his paycheck, he knew that he was in for $2.99. If he dealt with a bank, it might not cost anything to cash his paycheck, or he might get hit by an overdraft fee, or have some payment denied and an insufficient funds fee imposed, or only later find that he has taken out an expensive loan to cover an overdraft due to the precise order of deposit and withdrawal. As far as he was concerned $2.99 bought him a fixed cost and what cash he received was his, free to use in its full amount as he chose.