Why variety stores often sell items at higher prices than your local supermarket
In short: Variety stores thrive by balancing deep discounts with surprisingly high markups. While shoppers perceive a bargain, these retailers often rely on smaller package sizes or generic goods to maintain profit margins. This complex pricing strategy has sparked global debate about their role in local economies and food access.
Variety stores, historically known as five-and-dime shops, operate on a distinct business model that differentiates them from superstores or department stores. Their profitability relies on two primary mechanisms: high-volume sales of heavily discounted goods or, conversely, pricing specific items higher than standard retailers. To maintain fixed price points, these stores often source generic brands, purchase closeout or bankruptcy stock, or sell products in smaller unit sizes than those found in traditional grocery stores. This allows them to offer perceived value while managing their margins.
The global proliferation of these stores is often tied to economic shifts. In Japan, 100-yen shops surged in popularity following a decade-long economic recession starting around 2001. Similarly, in Hong Kong, major department stores launched low-cost shops to compete for customers in poorer communities. In India, the US Dollar Store, founded in 2003, pioneered the single-price model by leveraging global supply chains to import merchandise from countries like China, Indonesia, and Spain. These retailers frequently benefit from lower variable costs, such as reduced wages or favorable tax environments, which help sustain their business models across diverse international markets.
The impact of these stores remains a subject of intense scrutiny. Critics and various studies allege that dollar stores contribute to the creation of food deserts by outcompeting local businesses, leaving communities with limited access to healthy, affordable food. Some U.S. states have responded by passing restrictions on new store openings. However, the industry disputes these claims, with some chains arguing they provide essential options in underserved areas. Furthermore, the demographic of these stores is broader than often assumed; they attract a wide range of income levels, as evidenced by the presence of variety stores in affluent areas like Atherton, California, and increased patronage from higher-income customers in Great Britain following the 2008 financial crisis.
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Sources
- Summary by Intellect · source: Variety store
- Also: Wikidata — variety store · CC0
- Also: Wikidata — variety store chain · CC0
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