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Posted: 3:29 p.m. Tuesday, July 29, 2014

The #1 Threat To Your Dollar Store Savings

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By Clark Howard

ClarkHoward.com


I'm a big dollar store shopper. I love both Dollar Tree and 99 Cent Only stores. Both are true dollar stores, where all merchandise is priced at $1 or less.  

But the merchandise at Dollar Tree is going through a "Honey, I shrunk the kids" moment. Item by item, the sizes are getting to be microscopic. The Barbasol shaving cream -- a longtime dollar store crowd-pleaser -- was once 14 ounces and then it became 11 ounces. Now it's a 6 ounce can.

Toothpaste is magically shrinking at Dollar Tree too.

Dollar stores face a big challenge

So what's going on? A lot of products are suffering from wage inflation, especially among the imported goods from Asia. So if Dollar Tree is still going to make a profit, they have to shrink their product size to hit that $1 mark. (Dollar Tree also has a sub-brand called Deals brands that is not dollar focused, so maybe toothpaste will have to go there at $2 a pop!)

Taking a look at the future for dollar stores, if the shrinking of product size keeps happening, shoppers are going to lose their sense of urgency and shop elsewhere. That's prompted Dollar Tree to buy its indirect competitor Family Dollar, which is more like a mini Walmart rather than a true dollar store -- because it sells products at a variety of price point.

Because let's face it: You don't have a brand if you have to become Two Dollar Tree! So Dollar Tree can only grow by absorbing Family Dollar at this point. While they will keep the two brands separate, this shows that growth will have to be beyond just the single dollar price point.

The battle of the buck is on: Walmart Vs. The Dollar Stores -- Who Is Cheapest?

So like the bygone era of penny candy, nickel candy bars, and gasoline for 25 cents a gallon, these are all recognitions of inflation. As much as I hate to say that, it's true -- inflaton marches on and we all feel it in the wallet. 

By the way, some of my favorite items to buy at dollar stores include household cleaning products, OTC meds, party supplies, and balloons for every special occasion. 

Don't miss these bargains: See 3 Great Deals at the Dollar Stores.

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