Dollar Tree and Dollar General have a secret weapon for keeping their prices so low
- Dollar stores are thriving right now. Dollar Tree, Dollar General, and Five Below all saw comparable sales increase in the third quarter of 2018.
- Dollar stores are able to keep their prices so low, in part, because they sell so many private-label products.
- Private-label products are made and sold exclusively for these stores, so they can be bought and sold for less.
Dollar stores are thriving right now. Dollar Tree, Dollar General, and Five Below all saw comparable sales increase in the third quarter of 2018.
Dollar stores sell food, clothing, beauty products, electronics, and, just about everything else. The stores are meant to provide a "treasure hunt" experience so that shoppers never know what kind of deals they'll find.While dollar stores do often carry name brands for low prices, one of the biggest reasons dollar store prices are so low is their use of private-label products.
Private labels are used by everyone from Costco to Trader Joe's to sell products for less. Private brands give retailers a better handle on margins, and their unique offerings provide a hedge against competitors.
Many private-label brands are heavily geared towards millennials and Gen-Z shoppers because millennials are generally less loyal to well-known brands. Instead, they focus more on cost and whether a product is healthy and good for the environment, David Garfield, head of the consumer products practice at consulting firm AlixPartners, told The Wall Street Journal in October.
Some retailers, such as Dollar General, make it obvious when a brand is private, like with its DG Home and DG Health lines. Meanwhile, Dollar Tree disguises its private-label products under unrecognizable names. When shopping at Dollar Tree, it's nearly impossible to tell which products are owned by the dollar-store giant.
Here's how dollar stores use private labels to help keep prices low: