The Dollar Tree store makes shopping fun and exciting even when you don’t have big bucks to burn. The Dollar concept stores like the Dollar General or the Dollar Tree have items priced at $1 or even less.
Children, teenagers, and low-income communities throng these stores to find everything from toiletries to candies to toys to makeup, stationery, etc.
Everything in the inventory is sold for $1 only, with a few exceptions coming up lately. While a certain affluent section of the society might never step foot in these stores, they still manage to rope in many customers every day.
Shopping at a Dollar Tree is not only quick but also economical. Most often, you find items you wouldn’t find anywhere else.
But if you are wondering how these stores make Money selling their products so cheap, here is a real eye-opener. We will decode some facts to showcase how these concept stores make Money!
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How Does Dollar Tree Make Money
But have you wondered how these stores manage to make such booming profits when they appear to be giving things away just like that? You will be surprised to know about the amazing concepts they have encashed upon:
This is how Dollar Tree makes Money…
Dollar Tree’s Business Model
Dollar Tree usually buys its products from several private labels and lets the labels remain. When you buy things from a Dollar store, you can find the private brand labels in most products. Some products may not have a label.
These are procured through a Special Buy process. Dollar Tree buys out expired goods from various companies and then sells these products cheaply at their stores.
The companies are also too happy to let go of their excess old stock at offered rates. This way, Dollar Tree stores still manage to make a profit on products no longer wanted by other stores.
Different ways through which Dollar Tree makes Money:
1. Inventory In Smaller Sizes :
Maintaining an inventory with each item priced at $1 is just a trick. They trick the people who believe that they are getting too much in just under $1. But the fact is that these products have a much smaller size than the standard sizes found in grocery stores. People are easily tricked into buying 2 to 3 quantities of the same item to get the required size or amount.
These stores are ideal for some items, but you cannot expect high-quality or long-lasting items from here. They mostly sell items made from cheap and flimsy materials. Most of their products last for a day or less and are worth their price of only $1. They attract the weaker sections of society by selling cheap children’s toys. These products are mostly made with low-quality tiny pieces that easily break or come off. Electronics usually malfunction after one use only. The devices are not made with proper protocols and safety standards.
More surprising is that people are aware of the quality concerns of the items bought from a Dollar Store and do not mind going and repurchasing one when a thing breaks. They do not understand that they are only helping the Store earn more Money. Instead of buying a higher quality item at $4, they do not mind paying twice or thrice for a low-quality item. This is one of the genius marketing strategies of the Store Owners who have done wonderful research on customers' mindsets.
2. Selling Private Label Products :
Most of the brands sold in Dollar Stores are private labels you might have never heard of. These stores have special tie-ups with the private labels to manufacture these products at low costs and specifically for Dollar Stores. As they use private labels, they can demand whatever price they want for a certain product for seemingly low quality or less quantity.
Private labels are, in fact, the ‘secret weapon’ for these stores. A private label is a brand usually owned by the store only. They can be identified as the ‘store brand’. These stores have several brands under which they sell their own manufactured or packed products.
These labels cost them less to manufacture, but they can also manipulate the quantities to make them fit under the $1 price category. Today, people do not want to stay loyal to a specific brand and want to try different brands that offer low rates. This mindset has helped stores like Dollar Tree develop their private brands to let people buy the same products offered by another brand at higher rates at low rates. When people buy their private labels, these stores make more Money.
3. Keeping Staff at Minimum :
Dollar Tree Stores do not hire too many staff. You may only find 3 to 4 people available to help you choose your products at a large Dollar store because they do not want to pay too much staff. By keeping staffing to a minimum, they manage to earn better profits. This is also one of the reasons why Dollar Tree store lines get too long during weekends and holidays.
They keep a low staff rate, so they do not have to pay many employees. An average grocery store employs around 12 to 14 staff members to be better able to help customers find their products. An average Dollar Store hires only 4 to 5 staff members. The stores are also smaller in size, and they manage to do so with fewer employees. Fewer employees mean fewer employee salaries and benefits to pay for.
4. Locating near low-income communities :
Dollar Tree stores are located mainly near low-income communities as they know that their majority crowd will be from such places. People with higher budgets will prefer to shop at Walmart or Target. These stores are strategically located to lure low-budget shoppers.
Dollar Stores are giving tough competition to small or locally-owned grocery stores. The grocery stores cannot compete with the low prices and the convenience offered by Dollar Tree stores and eventually shut down. People fail to see that these grocery stores have healthier food choices and better deals than Dollar Stores. The marketing gimmick and conning façade of these stores lure many people.
Dollar Stores are responsible for creating a bigger economic drift and distress in the society rather than merging them into one. They attract low-income people by offering everyday needs at low prices. They are strategically situated in places where only low-income people reside. They convey a message to the society that low-income people afford us, creating major economic distress.
These stores make Money by giving attractive offers to low-income people to get their daily needs. Mostly these stores are located in areas with low-income communities.
But the sad fact is that while helping these people get their daily needs, they create bigger economic distress in the society.
It is as if these stores have divided certain sections of society.
They target vulnerable communities. Once they set up in such places, they easily gain a monopoly and wipe out all the competition from small grocery stores or daily needs stores.
They force low-income people to think that they too can buy everything at low prices. Sadly, these people only end up buying poor quality products. They end up making millions from these people. This is how these stores make Money.
How does Dollar Tree make a profit?
Dollar Tree makes Money by selling products packed in smaller sizes, selling private labels that no one has heard of, and by strategically locating themselves near low-income communities to attract a large crowd from such places. It also keeps a minimum staff in each of its stores.
How much does a Dollar Tree owner make a year?
An owner of a Dollar Tree store can earn anywhere between $74,460 to $74,460 annually. This figure is subjective to the store's location, level of seniority of the owner and the location of the store.
Why is Dollar Tree so cheap?
Dollar Tree stores can sell the same items that you find at a grocery store for cheaper because they are strategically placed in a B-class or C-class location and have less rent. They also keep significantly fewer staff. The other items sold under private labels are packed in much smaller sizes and hence cheap.