DOLLAR STORES - The best of times and the worst of times

“It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light,, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven,  we were all going the other way.”

Charles Dickens

A Tale of Two Cities

The above quote sounds a bit too much like today for my comfort but I thought it was an interesting starting point for a consideration of the Dollar Store industry. These are very good times for these retailers. Straightened finances and inflation drive many a first time consumer through those doors. 

But not so fast. If inflation in China (4.9% in August) and Viet Nam (inflation hit 28% in August) keeps up at anywhere near the current pace isn’t it going to be a whole lot harder to find products that can sell for less than a dollar? Common sense suggests that eventually those three for a dollar items become two for a dollar; those two for a dollar items become a dollar and those dollar items disappear. 

As a sign of the times, 99 Cents Only stores just raised their price to $1.00. In an interesting New York Times interview with Eric Schiffer, CEO of 99 Cent Only stores, we learn that “[a] DOLLAR will still buy any item in a 99 Cents Only store, but don’t expect a penny change. Later this month, the company, based in City of Commerce, Calif., will raise its top price to 99.99 cents (rounded up to a dollar at the register, of course), giving it some extra revenue and allowing the stores to keep the nines in their names.”

Interviewer, Ken Jaworski, asks the elephant in the room question when he queries:

Q. How long can you continue to sell products for less than a dollar?

A. I don’t know the answer. The inflation and the rise in commodity prices across the board that we’ve seen over the last year and a half have been unprecedented. Our founder, Dave Gold, who is still our chairman, he’s been around a long time, an old-time merchant. He says he’s never seen a consistent rise in commodity prices across the board like we’ve had. If that continues for an extended period of time, we’ll have to relook at this. There’s no question about it.

I guess they could always see $1.99 Stores but it just wouldn’t be the same. Or would it?