How to Start a Dollar Store

Part 1 - How to start a Dollar Store business - Background

A dollar store is a type of general store that limits its prices. It can sell anything from discounted household goods to party supplies. While the name suggest that nothing can be sold for over a dollar, some stores will make exceptions for certain products while keeping the vast majority of stock at a lower price.

Our guide is in 3 parts:

• Part 1 - How to start a Dollar Store business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a dollar store?

Independent store costs depend on location, inventory, and advertising budget. While it would be difficult, it’s theoretically possible to get started with as little as a few thousand dollars if opening in a less desirable section of town. Franchises can cost up to $267,000 or more for a 10,000 square foot store. These start-up costs cover everything from stock to marketing supplies, plus they give an owner a comprehensive plan on how to manage their business.

There are also DIY franchise packages that can be purchased for under $30,000 if the owner is willing to do the majority of the work on their own. If financing, make sure you get a loan that can stretch to include the cost of merchandise.

What are the ongoing expenses for a dollar store?

Dollar store businesses have to account for the costs of their location (rent, permits, etc.), as well as the cost of merchandise, advertising, and employee salaries. They’ll also need commercial insurance to protect against liability claims, natural disasters, and criminal activity.

Who is the target market?

The target market is anyone who appreciates a good deal. In certain communities, this may mean catering to those at the lower end of the income spectrum. However, the market is open to people of all earning brackets.

How does a dollar store make money?

Dollar stores charge a mark-up on the items they sell. They will typically get inventory by buying large quantities of stock at wholesale prices. By buying products at a deep discount, owners can afford to sell them for a dollar and still make a profit.

How much can you charge customers?

Some owners set their prices at $1 or less while others will make exceptions for higher ticket items. If choosing to make certain items more than $1, be sure to do so sparingly. Your base clientele will not appreciate having to hunt for prices when they’re in a dollar store.

Dollar stores aren’t always the least expensive place to shop when compared to other types of discount stores. Many owners will sell off-brand items at odd sizes as a way to make it look as though customers are getting a better deal than they are.

How much profit can a dollar store make?

Dollar stores may make up to $.80 profit on items they sell, though the average is about $.35 for each item. This means a dollar store would have to sell 200,000 items a year to make around $70,000 in profit.

How can you make your business more profitable?

Selling certain items at big losses is a good way to attract people into the store, so they have the opportunity to pick up other items at a much larger profit. Running promotions or contests can help to attract new clientele too. Dollar store owners can also consider branching out as a franchise or potentially opening more conventional convenience stores in addition to their original venture.

Day-to-Day and Growth

What happens during a typical day at a dollar store?

The duties of the owner and staff are all tied in with the daily operation of the store. Stocking, selling, managing employees, ordering inventory, and marketing are all tasks that will need attention on a regular basis. Owners should also consistently be looking for new opportunities and avenues to find additional stock at the right prices.

What are some skills and experiences that will help you build a successful dollar store?

Dollar store owners should have some experience either managing or owning a related store (e.g., convenience store, general store, etc.) Having a general business degree may help, but is by no means required. Owners should be organized, good with people, and able to keep up with the needs of a diverse customer base.

What is the growth potential for a dollar store?

Dollar stores are big businesses in many parts of the US. Many people need a store near them where they can buy necessities and luxury items that they wouldn’t have the opportunity to buy at a conventional store.

What are some insider tips for jump starting a dollar store?

Dollar stores are like a more practical type of convenience store, which means the location of the store needs to be easily accessible to your customers. If there isn’t enough traffic in the area, it can lead to a store’s swift downfall.               

The next step is ensure you have the right relationships with wholesalers and liquidators. Not only is this a good way to get quality merchandise, it’s also usually the only way to get new merchandise on a regular basis. The more items you get into the store, the more you’ll entice people to stop by just for fun. Most people who shop at a dollar store are open to buying more than just the bare necessities, and new merchandise is a good way to inspire them to try new products.

Finally, make sure that the store is always clean and that you’re stocking things that your demographic can actually use. Customers need to see the value of shopping at your store over the other types of discount stores in their area. The more you can do this, the more you’ll get the word-of-mouth you need to convert more people into regular customers.

How and when to build a team

Most dollar stores function best when they’re open from morning to night seven days a week, so owners should hire a team right away. Look for employees who are responsible enough to handle different types of customers so there’s less chance of theft or disturbances (which can be a common occurrence in discount retail stores.)

Part 2 - Is a Dollar Store business the right fit for you?

Part 3 - Action plan to launch your Dollar Store business in 90 days