Concentration in the dollar store sector

by on October 17, 2017 at 9:35 am in Data Source, Economics | Permalink

Already, there are 14,000 one-story cinder block Dollar Generals in the U.S.—outnumbering by a few hundred the coffee chain’s domestic footprint. Fold in the second-biggest dollar chain, Dollar Tree, and the number of stores, 27,465, exceeds the 22,375 outlets of CVS, Rite Aid, and Walgreens combined.

Here is the full Bloomberg piece, by Mya Frazier.  One point here is that “retail concentration,” which we do observe in the data, is unlikely to lead to very high prices.  A subtler point is that the dollar store sector itself is somewhat concentrated.  But that is yet another way of seeing why concentration indices can be misleading: “They’ve taken over a big chunk of the nation’s dollar stores!” isn’t exactly a recipe for sustained high prices, if anything the contrary.  Yet another point is that we may be rather deliberately moving to an uglier but cheaper world.

1 Benny Lava October 17, 2017 at 9:44 am

The throwaway line “we may be rather deliberately moving to an uglier and cheaper world” deserves a post of its own please.

2 Seth October 17, 2017 at 10:31 am

“cinder block” = “ugly” is my guess.

3 GoneWithTheWind October 17, 2017 at 10:31 am

It isn’t uglier but it is cheaper. There is a niche for affordable “stuff”. Those Halloween decorations, birthday cards, envelops and other small desk top items, party stuff. There are simply some things, use once and throw away things, that don’t need to be the best or have a100% markup.

4 peri October 17, 2017 at 10:51 am

I don’t think it’s the cinder blocks. Tilt wall construction is hardly more attractive.

Saw one the other day, along a pretty stretch of road west of […], five miles from town, out in the hills. They had apparently exploded a small tactical nuclear bomb. Within this crater they had dropped a Dollar General, just that, no parking lot or anything.

Now why Tyler woke up this morning with a sudden urge to dissemble about his obvious desire for “an uglier and cheaper world,” is a mystery.

5 FUBAR007 October 17, 2017 at 11:06 am

It isn’t uglier…

That depends on whether you find strip malls, box stores, and small-town, cinder-block-and-corrugated-metal architecture efficient and charming in its simplicity or bland and lifeless.

At least pre-WWII, Main Street architecture tended to have some character.

6 Hoosier October 17, 2017 at 11:26 am

They’re crazy ugly. American cities are boring and now and often ugly and characterless even though they are more prosperous than in the past.

A dollar store may be useful, but it ain’t pretty. Neither are waffle houses. I’m happy both are available btw, just wish there weren’t so many of them.

7 dearieme October 17, 2017 at 11:05 am

I suspect that Mr Cowen hasn’t grasped that “deliberately” has at least three meanings. Which meaning he means I have no idea.

8 Jeff R October 17, 2017 at 12:11 pm

Perhaps you should deliberate on the matter.

9 Al October 17, 2017 at 11:41 am

You can hear the liberal sniffy.

‘Cinerblock”
‘Ugly”
“Cheap”

These stores provide goods at a reasonable price with low overhead. Further, poor people *like everyone* enjoy making decisions. It is one of the true pleasures in life. A store with very low unit prices enabled those with less resources to make more decisions. *Making them happier than they otherwise would be*.

Only a liberal would cheer for the destruction of others choice and happiness.

Worst post, ever.

10 Careless October 17, 2017 at 12:14 pm

Only a liberal would cheer for the destruction of others choice and happiness.

Yeah, a conservative would never, say, ban gay marriage.

11 msgkings October 17, 2017 at 12:25 pm

Boom

12 DK October 18, 2017 at 5:46 pm

“These stores provide goods at a reasonable price”

That should say “absolute price.”

In many cases, the Dollar channel’s prices are higher on a price per volume basis than other stores.

13 Steve Sailer October 17, 2017 at 11:53 am

“The throwaway line “we may be rather deliberately moving to an uglier and cheaper world” deserves a post of its own please.”

More immigration would solve that problem.

14 FXKLM October 17, 2017 at 6:36 pm

Based on who wrote this, I’m assuming this was sarcastic, but cheap immigrant labor actually would facilitate prettier buildings.

15 Todd October 17, 2017 at 9:47 am

‘Yet another point is that we may be rather deliberately moving to an uglier but cheaper world.’

They are counting on it. It’s their business plan:

“Then Jim Thorpe, Dollar General’s chief merchandising officer at the time, defined the core customer for the investors: “Our Best Friends Forever”—an extremely cash-strapped demographic, with a household income less than $35,000, and reliant on government assistance, that shops at Dollar General to “stretch budgets.” Thorpe said these BFFs represented 21 percent of the chain’s shoppers and 43 percent of its sales. His final slide touted a goal of increasing sales 50 percent, to $30 billion, by 2020.”

16 Brian Donohue October 17, 2017 at 10:43 am

Like Mya, I also find cheap and ugly people vaguely distasteful.

17 Hoosier October 17, 2017 at 11:30 am

They’re not distasteful, I shop at dollar general on occasion and understand that some people depend on them. Doesn’t change fact they’re super ugly. If people had the money the majority would be shopping elsewhere for the most part.

No need for hate or condescension toward either side.

18 Jeff R October 17, 2017 at 12:15 pm

But we get plenty of it, anyway.

19 Brian Donohue October 17, 2017 at 12:23 pm

The fact that my comment wasn’t immediately recognized as sarcastic says something about the times we live in.

20 JWatts October 17, 2017 at 3:16 pm

LOL, I caught it. But only because I know you’re prior posts. There are plenty of posters (cough, rayward, cough) who are Left leaning elitist bigots. Granted, most of them would never say something as direct as “I also find cheap and ugly people vaguely distasteful.”, but they will write diatribes about how awful Walmart or McDonalds, etc and the people who shop there are.

21 Becky Hargrove October 17, 2017 at 10:03 am

Often these stores are within close walking distance of their local customers as well. While they do not carry a wide range of alternative herbal remedies, they don’t have an attitude about carrying them, as one sometimes encounters in rural pharmacies. I’ve found that the prices for what is essentially the same offering in this regard, are often about a third of what the pharmacy would charge, if the pharmacy chose to carry the product at all.

22 Hadur October 17, 2017 at 10:03 am

Sad – Dollar Tree is much better than Dollar General! At least in Northern Virginia, Dollar Tree thankfully predominates. Don’t be fooled by the “Dollar Tren” imitator near Seven Corners.

23 Jeff Brown October 17, 2017 at 10:18 am

Dollar Trees in VA are better. I assume being near the HQ is why. The one I visited in the Hampton Roads area was well stocked. I wondered where such cheap dishes were when I was in college.

24 JWatts October 17, 2017 at 11:56 am

Dollar General’s are better than Dollar Tree’s in middle TN. (Which is where the HQ is.) So Jeff Brown might have a point.

25 Lurker October 18, 2017 at 12:01 am

Seven Corners, talk about eye sores!!! Dogfishhead is the saving grace of that entire asphalt confluence.

26 Pshrnk October 17, 2017 at 10:07 am

Fred’s is better than either. But less than a thousand stores.

27 Matt Raft October 17, 2017 at 3:10 pm

Exactly my thinking. I wonder why Fred’s didn’t move in when Walmart left. A dollar store with a pharmacy is exactly what Fred’s is. Why didn’t the local government invite Fred’s?

28 Jeff Brown October 17, 2017 at 10:16 am

Dollar General goes to where their customers are, suburban/rural poor. In the 8 miles from my house to the first drug store, there are two Dollar General stores. There is another if I turn at the first and drive 10 miles. All are essentially the only store besides convenience/gas stations in their area. They aren’t neat and kind of tacky, but they have cheap essentials near where customers live. It’s a good business model. (full disclosure, I had some DG stock, bought in anticipation of the Great Recession, but was bought out when they went private)

29 Dan in Euroland October 17, 2017 at 10:24 am

Since I try to do my part in not making the world uglier, I won’t click the bloomberg link. But I am curious, does Frazier argue that this concentration is bad for consumers in the article?

30 Andrew T Flicker October 17, 2017 at 10:54 am

He does not.

31 Jonathan October 17, 2017 at 10:25 am

I would also not discount the role SNAP plays in all of this. The number of stores accepting SNAP jumped after the stimulus.

32 Albert October 17, 2017 at 10:39 am

At least Dollar General took SNAP before that, I’m not sure about other dollar stores.

33 HL October 17, 2017 at 11:09 am

Hell even gas stations take SNAP now. Dollar Tree takes SNAP but it doesn’t work a fair portion of the time.

34 JonFraz October 17, 2017 at 1:21 pm

Family Dollar also took SNAP before the recession. DollarTree does have some foods (I just bought a bottle of catsup there the other day) but because they only carry merchandise that can be priced at $1 the choices are very limited. I don’t think I have ever seen anyone using a food stamp card at a DollarTree.

35 rayward October 17, 2017 at 10:41 am

Dollar stores are magnets for robberies. I suppose it’s partly due to the locations and partly due to the customer base. I have a home in a community that is well above average in terms of education, income, prices of the housing, etc., yet developers wish to put a dollar store on the main road in the community, a road with few commercial centers, which mostly have high-end shops. Indeed, the proposed site of the dollar store is next door to the most expensive women’s boutique. Residents have protested and the project is currently under review in the courts. Besides the NIMBY aspect to this, more interesting is why put a dollar store many miles from it’s customer base. Or is the customer base evolving: what one was yesterday, one is not today.

36 Hadur October 17, 2017 at 10:55 am

Why do you assume only poor people are interested in inexpensive goods? My wife and I make over the median household income for our area and buy many things like toothpaste, aluminum pans, birthday cards, etc. at Dollar Tree, because it’s by far the best deal you can get on those things.

37 Pshrnk October 17, 2017 at 11:14 am

I make enough to be in the 1% in my state. I stop in dollar stores because they are everywhere and much quicker in and out than alternatives.

38 DK October 18, 2017 at 5:57 pm

I recommend checking your true cost on those products on a price/ounce basis. Many manufacturers down-ounce products to meet a Dollar channel’s price thresholds, but they still maintain their margins.

39 RaywardThurstonHowell October 17, 2017 at 11:59 am

This kind of lower class establishment is an affront to our community. All kinds of undesirable people will gravitate towards such a place. Criminals, minorities, Trump voters. Egad, we can’t allow this to happen near our neighborhood!

40 Robert McGregor October 17, 2017 at 12:29 pm

Hey rayward, you wrote your own great “throwaway line:” “what one was yesterday, one is not today.” Don’t stop there! That deserves a post. TC will probably publish it. Sounds like a new meme!

41 JonFraz October 17, 2017 at 1:22 pm

Middle class people do shop at dollar stores, mostly for basic staples they have no desire to pay inflated prices for (paper towels, bleach, window cleaner, aspirin…). I’m one of them.

42 Effem October 17, 2017 at 10:56 am

We should work backwards from Return-on-Capital, not concentration, to look for anti-competitive practices. Industry has learned how to avoid the “obvious” mistakes and how to maximize the subtle ways of thwarting competition.

43 Wonks Anonymous October 17, 2017 at 11:00 am

The bit referencing “the coffee chain” makes sense in the original article, where they’d just mentioned Starbucks. Tyler should have replaced the phrase with “[Starbucks]”.

44 HL October 17, 2017 at 11:07 am

For the uninitiated, the Dollar General is more like a general store with products varying in price. More like a smaller Walmart. The Dollar Tree is specifically all $1.00, sometimes less (2 for $1.00). As a rural small town resident I’ve noticed that these stores have also turned into spots for socializing and seeing old friends.

Dollar Tree is vastly superior to Dollar General IME. The products with large margins, like paper goods, party supplies, etc are a better deal at the Tree. DG is way too much like Walmart but crappier. I’d rather just go to Walmart.

45 Joe In Morgantown October 17, 2017 at 2:08 pm

Dollar General/Family Dollar are like Walgreens/CVS/RitAide without the pharmacy and with much lower prices.

Walgreens isn’t any prettier.

46 Dain October 17, 2017 at 3:10 pm

At least in Berkeley the Walgreens is actually marginally prettier.

47 Pearl Yonick October 17, 2017 at 9:50 pm

HL is right. Commenters who conflate Dollar General and Dollar Tree are making a critical error.
Dollar General is a convenience store. It sells overpriced merchandise to urban poor. The same stuff you get at Walmart, but more expensive.
Dollar Tree is where everything is $1, so everything is a good deal.

48 DK October 18, 2017 at 6:00 pm

Define a good deal. Paying $1 for a 3.5oz tube of toothpaste is a horrible deal if I can get a 7oz tube for $1.50 somewhere else.

49 JB October 17, 2017 at 11:09 am

Very niche market, consolidation isn’t surprising

50 A Truth Seeker October 17, 2017 at 11:09 am

The American regime is entering into the Monopoly Capitalism stage. The wealth will get increasingly concentred in ever fewer hands until the population becomes incredibly immiserated. Then, the internal contradictions of the American system will reveal itself and the American regime will fall like an overrippen jackfruit or a langid durian.

51 Real Talk October 17, 2017 at 12:28 pm

You’re batshit crazy.

52 A Truth Seeker October 17, 2017 at 12:44 pm

No, I am not.

53 Yes October 17, 2017 at 1:12 pm

You are

54 A Truth Seeker October 17, 2017 at 1:57 pm

No, I am actually known as a person of sound mind and steady presonality in my community.

55 No October 17, 2017 at 2:11 pm

You aren’t

56 A Truth Seeker October 17, 2017 at 2:22 pm

Yes, I am. I am esteemed and well-regarded by my neighbours, who look up to me.

57 JWatts October 17, 2017 at 3:20 pm

II would think that it would be impossible for your neighbors to look up to you when you live in your parent’s basement.

58 That's because October 17, 2017 at 3:33 pm

Your neighbors are rodents

59 A Truth Seeker October 17, 2017 at 5:58 pm

My parents live in an apartment in another state. They have no basement. Actually, I have never seen a Brazilian house with basement, only multiple floors!!

60 A Truth Seeker October 17, 2017 at 5:59 pm

No, my neighbours are professors, office workers, housewives, students and lawyers.

61 middyfeek October 18, 2017 at 8:24 am

But he uses the word immiserate. IMO that could cover a multitude of sins and improves the neighborhood.

62 Thor October 17, 2017 at 7:38 pm

Ah there’s nothing like Marx 101 being regurgitated by a Brazilian.

63 A Truth Seeker October 17, 2017 at 8:03 pm

I am not Marxist. Marxism enslaves people. I favor bourgeois democracy.

64 Harun October 17, 2017 at 11:10 am

Is this proof that Tyler read the comment that said something to the effect that elites told the poor “you should be happy with globalization: you get the dollar store.”?

65 BC October 17, 2017 at 11:13 am

“But that is yet another way of seeing why concentration indices can be misleading: ‘They’ve taken over a big chunk of the nation’s dollar stores!’ isn’t exactly a recipe for sustained high prices, if anything the contrary.”

A case of never reason from a concentration change?

66 The Other Jim October 17, 2017 at 11:23 am

>we may be rather deliberately moving to an uglier but cheaper world.

Oh, I don’t know. If this exact same piece were written two years ago, you would have concluded that “we are finally moving to a world where people care about the poor, and provide them with inexpensive goods. Hope!!!”

67 Thor October 17, 2017 at 7:39 pm

Audacious hope!

68 chuck martel October 17, 2017 at 11:34 am

The article is an example of classic propaganda via the use of loaded adjectives and nouns: “husk, reeking, unruly, grueling, low-ticket, epidemiological, pox, permanent underclass, struggling”, etc.

” She describes feeling bombarded when she first walked into a Family Dollar—chips, rows of candy, coolers of soda—and wondering how places so filled with unhealthful food could possibly be authorized to take food assistance cards.” Pretty much like just about any supermarket.

” The program could open the door for the big players to go back into very small towns in a way that lets them avoid the traditional overhead problems.” The big players that were once in small towns were Sears and Montgomery Ward, who didn’t sell groceries.

The photos of customers are obviously meant to be as flattering as possible.

This article is just another lamentation over change, the desire for stasis, except, of course, personal income, which is supposed to rise in any situation. Things change and they’re not always beneficial for some. That’s life. If there were no dollar stores then some other change would take place.

69 Bob from Ohio October 17, 2017 at 2:19 pm

“wondering how places so filled with unhealthful food could possibly be authorized to take food assistance cards.”

Why can’t the poor/working class/lower middle class eat organic free range argula like I do? Snif, snif.

70 JosieB October 17, 2017 at 6:41 pm

Dollar stores arose because the classic capitalists could not imagine that it would be possible to make money selling inexpensive items to poor people. The whiff of condescension in the article illustrates that point of view.

Too many people in this country don’t get out much. Their loss.

71 DK October 18, 2017 at 6:04 pm

Dollar stores arose because they are a lot more convenient to shop at than a Walmart. If someone only needs a few things and have limited dollars until their next paycheck, they go to Dollar to get what they need. They can’t afford the large sizes at Walmart and it takes too long to get in/out.

72 zbicyclist October 17, 2017 at 11:36 am

Also worth mentioning is Aldi, with 1600 stores in the US.

They’ve figured out a way to make money in neighborhoods whether there are few other groceries.

73 chuck martel October 17, 2017 at 4:39 pm

Aldi laughs at competition. I can see one of their stores from here, directly across the street from a Walmart.

74 Adam October 17, 2017 at 11:42 am

Has anyone compared this kind of stores around the world? The UK has quite many pound stores (Poundland, Poundworld…). Japan has a lot of 100 yen or 99 yen stores. I don’t remember seeing any Euro stores in France or Germany. Is value of one Euro just not enough, or is this a cultural difference?

75 John Mansfield October 17, 2017 at 12:06 pm

Are the $15/hour municipal wage minimums part of an effort to keep businesses like Dollar General, and the people who might shop or work there, far away?

76 JWatts October 17, 2017 at 3:21 pm

I’m not sure it’s a primary reason, but it’s a likely affect.

77 JWatts October 17, 2017 at 3:22 pm

effect.

78 Bob October 17, 2017 at 12:15 pm

“Let them eat beans!”

79 Thor October 17, 2017 at 7:40 pm

A good bean is not to be sniffed at.

80 Bill October 17, 2017 at 12:30 pm

Dollar stores and the like provide entertainment for those who like to shop but do not have the money to do so. The sign Dollar Store is a commitment device–you don’t have to worry, you can buy this, because it is around a dollar.

Many things sell for around a dollar…like a five pack of cool aid mix; Kool Aid singles mix for around $2.00. It may not be good for you.

Think of the thrill of shopping in a Dollar Store like the thrill of playing the slot machines, but only shopping. It’s only a few dollars; the sign says so.

Aldi, on the other hand, is different. It is real, and actually has produce, etc., although it is also heavy on the snack items.

81 John Mansfield October 17, 2017 at 2:32 pm

You have very much described the experience of taking my eight-year-old daughter to Five Below. She enjoys it, and there’s limited expense that can come of it.

82 JonFraz October 17, 2017 at 1:15 pm

Bear in mind that while DollarTree is a true dollar store (everything really is just $1), Dollar General and Family Dollar are not– prices are often well over $1. They are, in effect somewhat cheaper and smaller WalMarts.

83 Bob from Ohio October 17, 2017 at 2:16 pm

My family income is over 100K but I occasionally shop at the nearby Dollar Tree [in a nice though declining suburb] for things like cheap greeting cards and small toys. It is clean and well organized, not ugly at all.

This is a snob post based on a snob article.

84 nailheadtom October 17, 2017 at 3:28 pm

When I receive what I know to be a cheap greeting card the sender is unfriended.

85 JWatts October 17, 2017 at 7:13 pm

That’s a win-win.

86 matt October 17, 2017 at 5:15 pm

Pretty sure it should be “Dollars General”…

87 Mark Thorson October 17, 2017 at 7:08 pm

The government of China should buy one of these chains or start one of their own. After all, China is where all this cheap stuff comes from. Cut out the middleman, and maybe we could have 50 cent stores. Nobody would complain about that. China wants to make the RMB an international currency. Offer a 10% discount to customers paying in RMB, and it’s done! White trash and blacks and Hispanics would be asking where do I convert my dollars into RMB? Right here, right inside the store!

88 Lurker October 18, 2017 at 12:25 am

Thanks for my morning laugh, Mark. That was a good one.

89 Reuven October 17, 2017 at 7:44 pm

Interesting comparison with Startbucks.

I’d love to see a $1.00 hot coffee place! There should be a lot of room for profit with a $1 cup of drip-coffee and it will get people in the stores.

90 JWatts October 18, 2017 at 8:35 am

“I’d love to see a $1.00 hot coffee place! … $1 cup of drip-coffee ”

I call those gas stations. Mapco offers any size coffee for $0.99.

91 bk October 29, 2017 at 12:20 pm

I’m not clear on how the point “that ‘retail concentration,’ which we do observe in the data, is unlikely to lead to very high prices” follows from the dollar store example. A bag of 100 candy corns for a dollar is not a high price, but a bag of three candy corns for a dollar is. In other cases where prices are pegged to a constant, nobody is surprised when quality or other non-fixed factors adjust to keep margins steady. Do we have evidence backing up the presumption that the goods sold for still-cheap prices aren’t diminishing in quality or quantity?

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