Do you shop at dollar stores? Family Dollar wants to triple the number of stores it has around the country. So what's the draw? I met up with USC marketing professor Valerie Folkes at the a dollar store in Santa Monica, Calif. With heaps of cantaloupes on one side of the entrance and stacks of plants on the other, I asked her about the lure of the dollar store.
"The bargain, of course. People love to get bargains. Partly, you have to remember too that this is kind of tough times for people. So when you see a dollar store it sends these signals, which is 'I can shop here and I don't have to worry about going over my budget. I know I can buy lots of things. I can buy things on impulse. And it's not going to, in the end, the price is not really going to bother me.' Whereas a lot of times if you go into maybe to a department store you might see some good deals, but you're always having to -- many people are having to worry about, 'Is this going to be over my budget?' So this is in some ways a freeing or a more fun experience," says Folkes.
Folkes says there are some bargains at the dollar store, but some items cost just the same -- or even more -- than you'd find elsewhere. For example, when you compare the price of diapers per unit -- they are three for $1, which is more than you'd pay if you buy them in bulk somewhere else. We found a box of raspberries for $0.99, but they're not exactly the best quality.
"That's kind of what you sometimes find in a dollar store. You find things that are not quite what you'd expect, but you tolerate it because it's after all a bargain," says Folkes.
But then there are things that are clearly not a good buy -- like a container of marshmallows that are powdering away with less than a month until its expiration date. Not such a good bargain. Folkes says the dollar store shopping experience is more than just good deals, though.
"Our brains don't like to work that hard when we shop. Oftentimes we think about so many purchases we make in a day. Maybe 100 purchases a person makes when they go to the grocery store. If you really stop and think about each of those purchases, you can't really think about every single purchase and whether you're getting a good deal or not and whether this price is higher than it was last time. So it's sort of freeing to go into a place where you don't have to think very hard. You can just surrender to your impulse. A dollar store is a place for impulse purchases," says Folkes.
Many folks are lazy when it comes to shopping. Even with big ticket items, people don't think as hard as we can, which is why retailers often price things at $2.99, $3.99, or $4.99.
"People pay attention to that first number when they're looking at a series of numbers. As the numbers trail off, they tend not to pay so much attention. So for example, paying $500 for a phone sounds like a lot. Whereas $499 is just below it. The difference between $499.99 and $500 psychologically is not the same as the penny that it might seem to be," says Folkes.
To be more efficient when she shops, Folkes uses Heuristics or rules-of-thumb. She goes to places where she feels like she can get a good deal and doesn't have to worry about each purchase. That's the same appeal that a dollar store has for bargain hunters.