Opinion: Dollar stores fit the bill: Prentice

Like most smart consumers, I’ve known for years that it’s possible to save by shopping at a dollar store. But I was surprised recently to learn how much it’s possible to save.

A basket of items that cost me less than $50 in a dollar store could have cost more than twice that amount if I had purchased them at my neighbourhood supermarket, drugstore or hardware store.

Dollar stores have been around for decades, but the days are long gone when they sold nothing priced at more than $1. Dollarama, a leading chain of such stores, now sells items priced as high as $3. Still, hundreds of items on the shelves of any dollar store are priced at $1 or less.

To test the potential savings offered by dollar stores, I visited a Dollarama outlet in Ottawa’s west end.

I roamed the store picking items I needed or items I knew I would need in the near future, such as painting and gardening equipment, light bulbs, batteries, envelopes, toothpaste, soap, cleaning products, greeting cards and gift wrap.

The bill came to $47.50 before tax.

Then I priced each of these items – identical wherever possible, or ones that were similar and  appeared to be of comparable quality – at a Real Canadian Superstore, Shoppers Drug Mart or Home Hardware.

I shopped as I normally would, except that now I looked for items that I had purchased at Dollarama, and went from store to store until I had found them all.

The total cost of all these items, before tax, was $122.19 – or almost $75 more than the $47.50 I had paid at Dollarama. When the 13 per cent sales tax is added, the savings were close to $85 on the basket of items that I had bought at Dollarama.

(As an aside, I find it maddening that most Canadian retailers do not include sales tax in their posted prices, as stores do in some civilized parts of the world, notably Europe. Addition of the taxes magnifies the difference in prices charged by retailers.)

How do Dollarama and other dollar stores undercut prices charged by their competition? For one thing, Dollarama and some of its competitors save on fees by requiring cash or debit card payments – no credit cards or cheques. Also, it offers no refunds or exchanges. And then there is the self-imposed discipline of that retail price ceiling of $3. If Dollarama can’t make a profit on an item with a maximum price of three bucks, it doesn’t stock it.

I found that some of the biggest savings offered by Dollarama were on paper products such as greeting cards, gift wrappings and envelopes.

The greeting card industry is notorious for slapping suggested retail prices on its products. It’s none of a manufacturer’s business to tell retailers how much to charge.

These suggested retail prices on greeting cards can be as high as five times what Dollarama charges for many of its cards. Dollarama, it seems, can make a profit while selling these cards for $1, even if the manufacturer’s suggested retail price is $4.99. (With tax, Dollarama’s price for such cards is $1.13. For a store charging a suggested price of $4.99, the customer pays a whopping $5.64.)

In my price comparison, Dollarama was cheaper for most items. In the few cases where I found a competitor with a lower price, such as Glad ClingWrap, the competitor offered the product in a larger size.

 

HOW SAVINGS MOUNT UP

ITEM                                       DOLLARAMA PRICE    COMPETITORS’ PRICE

Four small, decorative paper gift bags    $2                        $13.96

Five birthday cards                               $5                        $24.95

Two packets of gravy mix                   $1.25                      $1.98

E.D. Smith raspberry spread, 375 mL      $2                        $2.61

Garden trowel                                    $1.50                      $8.99

Arm & Hammer toothpaste, 90 mL          $2                        $2.24

Dove beauty cream bars, 200 g              $2                        $3.65

18 ballpoint pens                               $1.50                      $3.74

Scotch gift wrap tape, 16 m                    $2                        $2.98

10 large envelopes                             $1.25                      $3.82

100 letter-size envelopes                    $1.25                      $7.48

Four AA batteries                                   $1                       $4.29

Four 100-watt light bulbs                        $2                       $3.79

Eight small adhesive floor protectors        $1                       $1.75

Toilet bowl plunger                             $1.25                      $3.99

Large glass mug with handle               $1.50                      $3

Small cushion                                       $3                        $6.94

Thin doormat                                     $2.50                      $8.99

100 coffee filters                                   $2                        $2.50

Lysol toilet cleaner, 473 mL                    $2                        $1.25

Four packs of 15 decorative paper napkins$5                       $3

Glad ClingWrap, 50 m                         $2.50                      $2.30

Paintbrush, 2 inches                               $2                       $3.99

TOTAL                                              $47.50                   $122.19

 

Michael Prentice is OBJ’s columnist on retail and consumer issues. He can be contacted at news@obj.ca.