In the US, so-called ‘Dollar stores’ are ubiquitous. There are two very close to where I live. These stores offer all manner of items, food and household goods, priced at around a dollar, so that makes it cheap to shop. As far as I can tell, their model is to buy large stocks of items that manufacturers want to offload at hugely discounted prices for whatever reason and then resell them. This means that what you find in the stores is highly variable from day to day, depending on what items manufacturers were clearing out. You just have to try your luck.
In the latest episode of his show Last Week Tonight, John Oliver says that the business model of these companies is to make profits by understaffing its stores and underpaying its employees. While these stores are sometimes the only retail outlets in poorer neighborhoods and thus seem to serve a need, another problem (that Oliver did not address) is that by using their size to get huge quantities of stuff at low prices, they often drive existing mom-and-pop stores in those neighborhoods out of business. Thus the need they are serving is one that they helped create.
I read an article talking about how the entry of dollar stores is a predictor of the economic failure of a town (the economists here can put this in proper terms). One town did its research and prevented dollar stores from opening there.
Sounds like a plan (for an Ayn Rand capitalist).
John Oliver is very entertaining, but he’s clearly pushing a very slanted and unsupported set of claims, going by the OP.
(Couldn’t be stuffed bypassing geoblocking to actually check out whether the OP properly adumbrates the claims made)
That makes no sense.
The “need”, such as it is, is to pay as little as possible for what people purchase.
If the need were not there, people would not shop there instead of existing mom-and-pop stores in those neighborhoods, right?
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See, the traditional sense in which large operations drive away small operations is via loss-leading techniques and then put their prices up.
Is that what is truly happening?
Do they start out as dollar stores and then put their prices up to even more than the previously-existing mom-and-pop stores?
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Also,
If “understaffed” means insufficiently staffed for maximal profit, then clearly they are not understaffed. So I wonder what JO means by that.
Similar story for “underpayed”.
Clearly, the business model pays employees sufficiently to retain enough of them to run its business at a profit.
Or: E pur si muove.
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One final note regarding unstated premises: do people really imagine that existing mom-and-pop stores treat their employees any better than larger conglomerates?
I mean, we’re talking USA here.
Two claims that when combined become interesting, were they both true:
(1) “I read an article talking about how the entry of dollar stores is a predictor of the economic failure of a town (the economists here can put this in proper terms).”
(2) “In the US, so-called ‘Dollar stores’ are ubiquitous.”
Hm. John Oliver seems to have given up going after large issues if this is warrants a focus look.
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#3 John
A better way of thinking of understaffed could be ‘insufficient staff to manage the workload without exhaustion’ or similar. Underpaid, similar -- ‘pay not commensurate with the work done’ or ‘too little pay to keep the employee out of penury’… that sort of thing. In other words, framing those terms to make them about the employee, not the business.
…Ignore ‘is’ in the first line.
Holms @5, good point. Slanted. Framing. Priming.
My spouse is from a very small rust-belt town. The town was all mom & pop stores, that employed the family and a few others, as needed. The stores also sponsored scout troops and little league teams. A dollar store set up on the edge of town and closed down the mom & pop stores and employed fewer people and sponsored nothing. Then Walmart et up on the edge of town and closed down the dollar store and also sponsored nothing.
I read an article talking about how the entry of dollar stores is a predictor of the economic failure of a town…
It can also be an ACCELERATOR of economic failure, if not a CAUSE. Locally-owned small stores may charge more money for their goods than a dollar-store, but the money paid to them tends to get re-circulated within the town; as opposed to a chain like Walmart, which charges less but also pays local workers less, hires fewer of them, and moves more (if not all) of their profits out of the town altogether. All of which means that even if local customers are paying less money for their goods, that decrease in expenditure is more than offset by less incoming revenue (due to fewer workers earning less pay) and greater outflow of revenue (due to profits leaving the region altogether).
Also, larger chains can buy wholesale in greater quantities, for less unit cost, which also means less revenue incoming to whichever communities produce whatever they’re buying. That’s what “efficiency” ends up meaning on the macro scale: ever more money concentrated in ever fewer hands.
@9 Raging Bee: Walmart also has a tactic where they buy up land designated Retail in zoning and then refuse to sell it. Sometimes they build a store on the land, decide it isn’t profitable enough and close it but sometimes they don’t do anything with land. The point is to limit competition by holding on to the land that can be used for retail. The people living in the area are pushed towards using other more distant Walmarts. This runs up cost and time for people in the area.
This works because there are typically only a limited amount of space that is practical for a large box store. It needs a big compact location. So even if it’s a small percent of retail it can still effectively run up the cost of opening a box store in the area.
See, the traditional sense in which large operations drive away small operations is via loss-leading techniques and then put their prices up.
“The traditional sense” is not the only way. As we can see, there are other ways for big companies to drive out smaller competitors — without necessarily needing to raise their prices later.
Well, duh. People just like value for money.
Me, if I either have to choose to pay $$ or $ for the same product, I will pay $.
What exactly is wrong with that picture? Just makes sense.
@Raging Bee, 9:
For a great demonstration of this, I hugely recommend finding some way to watch episode 20 of the first season of “Bluey”.
Yes, I’m recommending an economics lesson written for five-year olds. Yes, I need to get out more. Then again, I unironically recommend Bluey as one of the best shows on television. (I have two small boys.)
(Oh, I forgot to mention -- the episode is literally called “Markets”.)
Me, if I either have to choose to pay $$ or $ for the same product, I will pay $. What exactly is wrong with that picture? Just makes sense.
Sure it does. Just like wanting to pay less (or zero) taxes “just makes sense.” Just like wanting to bust all those uppity unions and force down wages so you can pay lower prices for everything you want “just makes sense.” Just like shafting your neighbor for every penny you can get out of him, whenever you get the chance, “just makes sense.” And just like your employer getting rid of you and half their workforce to keep prices down and “be competitive” “just makes sense.”
Millions of people doing what “just makes sense” to them personally can sometimes add up to macro trends that impoverish people all around and concentrate more and more wealth in fewer and fewer hands. So it also makes sense for everyone to make at least some sacrifices for the collective good of slowing down or preventing such trends wherever it’s feasible.
Yes, I’m recommending an economics lesson written for five-year olds…
ZOMG THIS PLACE IS FULL OF COMMIES TRYING TO UNDERMINE THE MORAL FIBRE OF OUR CHILDREN AND POISON OUR PRECIOUS BODILY FLUIDS WHY DO YOU HATE AMERICA AND MASS-PRODUCED APPLE PIE SO MUCH?!!!
Thanks, I’ll look up that bit of subversive agitation. My mom would probably be laughing from her grave…
There you go. You think that the problem is the customers, not the retailers.
Not the dollar stores, in other words.
<smirk>
Here you go: https://www.bluey.tv/watch/season-1/markets/