Dollar Store Nation

What the success of the dollar store says about the American economy

In 1868, a new kind of store opened at 669 Broadway in New York City and immediately captured the city's attention. Immense, staffed with attractive young women, it featured silver-plated cake baskets, heavy-plated tablespoons, silk parasols, solid black walnut hat racks, pearl-handled knives—"pretty much everything," the New York Sun marveled at the time, and yet whatever one ended up choosing from this great cavalcade of merchandise always cost the same. The enterprise's name doubled as its universal price tag: It was called The Dollar Store.

Nearly a century and a half later, the novelty of the dollar store, the sense of wonder that attends to how many different ways a few cents worth of raw materials can be processed, packaged, shipped, and sold for a buck, still beguiles us. Earlier this year, the Tennessee-based chain Dollar General exclaimed it has "more retail locations than any retailer in America"—9372 at last count—and is planning to add 625 more in fiscal 2011. Approximately 6700 Family Dollar stores now blanket the U.S., and it's opening new ones at a pace of more than one a day. Dollar Tree opened its 4,000th store in October 2010 and recorded a 12.4 percent increase in sales throughout the year.

Fifteen years ago, there were fewer than 6000 dollar stores in the U.S. Typically, they've been cast as capitalism's consolation prizes, shabby oases of post-modern barbecue sauce and dangerously overachieving candle sets that have sprung up in the sort of retail deserts where even Walmart won't take root, and their rise is attributed to economic hardship and the need to stretch every penny like a hot wad of Silly Putty. And no doubt value has always been the cornerstone of these retailers—in 1871, when a dollar price point did not yet automatically signify an extreme discount, a New York Times advertisement for the city's original Dollar Store boasts that it is "selling goods for at least one-half what they can be purchased for elsewhere."

But as dollar stores attract more upscale consumers—Time reports that Dollar General's "fastest-growing customer segment is households making more ?than $70,000"—it also becomes more obvious that consumers shop at these stores not just for utilitarian reasons but also because of how shrewdly they cater to current lifestyles and sensibilities.

In a June 2011 feature for Wired, James Surowiecki writes about how online auctions, widely heralded as the future of retailing just 10 years ago, aren't even that popular at Ebay anymore. Dynamic pricing was supposed to make consumption more efficient, but we spend time as well as money when we're shopping, and even in the midst of the recession, time is often the scarcest resource of all. "Why go through an entire auction in order to arrive at nearly the same price you could have set before it started?" Surowiecki writes. In another instance, he quotes Harvard business historian Nancy Koehn: "Does it make sense to spend this much time on an auction when I might not even get the item in the end?"

In Ebay's millennial heyday, we didn't yet have social networks to distract us and the full force of Napster had yet to be felt. Shopping was not yet the new reading, the thing we would surely do more of if we could just find time to do it. Indeed, millions of serious shoppers still devoted hours each week to keeping up encyclopedic legacy retailers like Walmart and Costco, marching dutifully through Lawn & Garden, Sporting Goods, and Pharmacy in the same way that once marched dutifully through the sections of the morning newspaper.

Now, when we can barely free up a few seconds to see what sort of deal Groupon is offering on teeth-whitening services, we no longer have the time or the patience for epic seven-day Ebay auctions. Walmart, with its parking lots and aisles ?only a long-distance runner could love, isn't much better, and that's one reason its sales have been dropping for seven straight quarters. We want faster, simpler, more convenient shopping experiences. At Dollar Tree, not only are the prices fixed rather than dynamic, they're downright monolithic. "Everything's a Dollar!" the signs there exclaim, and unlike at Dollar General and Family Dollar, where ?most of the stock actually goes for prices other than a dollar, this brand promise holds true. That 2.5 liter bottle of soda? It costs a dollar. The multi-purpose lighter with child-resistant safety lock? Also a dollar. Same with the Speed Stick deodorant, the patriotic paper napkins, the nickel-plated party trays. Shopping at Dollar Tree requires less cognitive function than it takes to follow Kim Kardashian's tweet stream, its stores aren't big enough to get lost in if you're not paying full attention—it's the perfect environment for distracted, time-crunched consumers who no longer approach shopping with the same deeply felt conviction that previous generations of consumers did.

Plus, remember, everything's a dollar! And who feels like they should have to pay more than a dollar for anything these days? In the age of Groupon and Gilt.com, 50 percent off is the new full retail, the price that suckers pay. Hardcore bargain hunters net 2,000 bucks' worth of groceries for a $100 and a fistful of coupons on a single trip to the store. Lands End unloads new polo shirts for as little as $2 in its monthly Classifieds sales. Pay anything at all for music, movies, or news and millions of folks will judge you a spendthrift or a fool. Dollar Tree caters to this ethos and sets its prices at levels that often verge on the merely symbolic. Even when all it's selling is a pile of moss, its prices somehow seem impossible: That tiny heap of dead plant matter, in the nondescript packaging, for only a buck? How can they do that?

"It's all about the thrill of the hunt!" Dollar Tree's website exclaims, and as long as you avoid flashlights that achieve some of their luminescence through old-fashioned fire, every purchase becomes an engaging science experiment. How long will that $1 tote bag last? Does salad dressing from an obscure salad dressing region known as Riverton Valley taste any different from salad dressing that hails from the world's best known salad dressing region, the Hidden Valley? As much as they fulfill utilitarian needs, dollar stores simultaneously serve as venues for conspicuously superfluous consumption. They're thriving at a time when, as The Wall Street Journal recently noted, non-essential purchases comprise a greater share of consumer spending than ever before. Their success arises out of prosperity as well as need, and far from being a consumer's last resort, they're growing as fast as they are in part because consumers find them more satisfying to shop at than other retail formats. Pretty soon they may be so ubiquitous someone will undoubtedly propose legislation to keep them from wiping out the giant big-box retailers that have traditionally given America's suburban sprawl its bland formulaic authenticity.

Contributing Editor Greg Beato writes from San Francisco.