Dollar stores have a rich nickel-and-dime history
By all accounts, dollar stores are doing quite well.
Reports for the third quarter show that the largest of them — Family Dollar Stores, Dollar General and Dollar Tree — are all enjoying booming sales.
Such one-price stores have been popular since the 19th century, offering an eclectic and ever-changing inventory at steep discounts. They have provided an efficient way for manufacturers and distributors to dispose of goods that are otherwise difficult to sell. And they have brought an array of consumer goods within reach of even the most cashstrapped Americans.
Frank Winfield Woolworth, the founder of F.W. Woolworth Co., is typically considered the father of the dime store, the precursor to today’s dollar stores. But in an autobiographical account in 1919, Woolworth freely admitted that he didn’t invent even the “germ” of the five-and-dime concept. His recollection of exactly who did was fuzzy. It was around 1870, in or near Boston, he said, that somebody “conceived the idea of opening a store containing exclusively goods to sell at 99 cents. Who this pioneer was I have never been able to discover.”
Woolworth may have been thinking of H. Peyser, who was advertising his Boston-based Bellevue 95-Cent Store — “Our Motto, ‘Quick Sales and Small Profits’ ” — as early as 1869.
But Peyser wasn’t the first, as George Husted’s 25-cent store in Harrisburg, Penn., had already been operating for three years, selling jewelry, ice pitchers, wood and coal.
As with many of today’s dollar stores, not all of Peyser’s stock was priced at 95 cents, but much of it was. At Peyser’s, 95 cents could buy five yards of blue denim, two pairs of ladies’ drawers, a heavy-wool man’s shirt, four oversized linen towels, nine bundles of cotton batting or a pair of gloves.
Woolworth first recognized the potential of selling goods fast and cheap when, in 1873, a 99-cent store opened up across from the dry-goods store where he worked as an errand boy. The store was “crowded from the first day,” Woolworth recalled.
Also inspiring the young entrepreneur was a story he had heard about a travelling salesman who partnered with a Michigan dry-goods store to sell handkerchiefs below cost, at five cents apiece, to get people into the store. To make a profit, they sold “other notions and stuff” along with the handkerchiefs.
Looking around the store, the salesman ingeniously identified “a lot of old dead goods that had been lying on his counters for years.” He placed the items on a counter and marked them all at five cents.
It was a great success as the higher- and lower-value goods were equally attractive and people made purchases beyond the five-cent counter, generating business in other departments.
By 1878, Woolworth was working as a clerk at the Moore & Smith dry-goods store, where he saw the fivecent counter in action. Stocked with $70 worth of new items made specifically for selling at five cents, plus “a lot of other old trash which had been accumulating in the store for years,” the counter was a hit. “It did not make any difference whether the goods had any value or not,” Woolworth observed. “Any old stuff we could find around the store would be fired on that counter and would sell immediately.”
Based on this success and the sudden appearance of five-cent stores in nearby towns, Woolworth saw an opportunity slipping away. In early 1879, he borrowed money to start Woolworth’s Great Five Cent Store in Utica, N.Y.
By the early 1880s, Woolworth, in partnership with his brother, had expanded into Harrisburg, Scranton and York, Penn., and added a 10-cent line of goods. But the stores were struggling. By the summer of 1882, the business was dead and most competitors had returned to the traditional dry-goods model or given up on retail altogether. Woolworth chose to stay loyal to the five- and 10-cent strategy, which ultimately proved quite successful. By the early 20th century, Woolworth’s consisted of six chains of affiliated stores. The stores’ success was due largely to retail innovations that continue to benefit today’s dollar stores, especially the one-price model.
Woolworth believed that his early competitors failed because they diluted their brand.
“They introduced into their stores higher-priced goods, which apparently took away the charm of the five- and 10-cent business and their sales fell off accordingly.”
Whether today’s dollar stores will similarly lose their charm by offering goods priced at more than $1 remains to be seen.