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Dollar stores get spruced up; deals less clear cut

Ducking into a dollar store to pick up soda and a bag of cookies might save you time and effort, but will you save money?

Major chains such as Dollar General and Family Dollar Stores have accelerated their growth by transforming their stores with wider aisles and better lighting and adding more name brands. They’re shedding their image as depots for misfit merchandise.

A big attraction is that shoppers can get in and out quickly. Dollar stores are relatively small. But when it comes to value, the picture is a lot less clear-cut.

Prices tend to be cheaper than in drugstores and supermarkets, but slightly more expensive than at Target or Walmart, said Dutch Fox, an FBR Capital Markets & Co. analyst. But prices can fluctuate.


The dollar store industry varies greatly, too, with plenty of independent operators and smaller chains. But the bigger players are expanding quickly.

Dollar General has 10,300 stores in 40 states and is opening at 600 new locations a year.

Family Dollar, with 7,500 locations in 45 states, is opening about 500 a year. Here’s what to expect:

■  Merchandise: Dollar stores remain defined by relatively limited selections. Don’t expect any produce or meat counters. And rather than organic or premium brands, dollar stores focus on a handful of big-name products with the widest appeal. Instead of 20 types of ketchup, for example, there might be only five.

The options are getting more attractive, however. One of the biggest ways dollar stores are raising their profile is by stocking up on groceries and name brands.

‘‘Ten years ago, dollar stores were places you went to because you had to, because you didn’t have a ton of money,’’ Fox said. ‘‘The stuff on the shelves was a wreck — the assortment was all over the place.’’

■  Prices: It probably won’t be a dollar. The moniker has been rendered outdated by inflation. But Dollar General and Family Dollar say about a quarter of their products still cost just a buck.


The trick is to pay attention to package size. Pat Conroy, vice chairman of Deloitte’s consumer products division, said dollar stores are able to make money by working with suppliers to offer name brand products in smaller packages.

At a Family Dollar in the Bronx, for example, a bottle of Coca-Cola and a box of Cap’n Crunch cereal both cost $1. But at 14 ounces, the Coke bottle was smaller than the 20-ounce bottles sold at supermarket checkouts. The cereal box held only four servings.

In general, dollar stores keep prices down because their limited selections mean lower overhead and inventory costs.

But if your goal is to score the lowest price for every item on your grocery list, you’ll need to do some legwork to compare prices, mental math comparing prices and package sizes, and more homework to stay on top of weekly promotions at various outlets.

Companies often compete by offering the lowest prices on select items, such as a popular brand of laundry detergent, Fox said. This helps them draw shoppers — who will probably spend on other items with higher profit margins.