Dollar Store, Inc.: The Booming Business of Being Cheap

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The winning formula begins in tiny towns -- the underserved communities even Wal-Mart or Target wouldn't give a second look. Dollar stores gobble up cheap real estate, sometimes an old store front on a forgotten Main Street, or the strip mall that lost a bookstore or an electronics retailer. Then they hire a small work force -- each store might only have two people working at a time, whereas a Wal-Mart or Target will have a payroll of more than 100.

Dollar stores use almost no advertising. No expensive TV commercials. Customers can pick up a circular in the front of the store to find deals.

Their final secret is a laser-like focus on the customer -- some might even call it an obsession. When Family Dollar President Mike Bloom is talking about business, he paints a picture of a mother.

"Eighty percent of our customers are women so we think about 'her' all the time," Bloom said. "She earns $40,000 a year or less and a lot of them earn $25,000 a year or less. It's usually a single mom in a household typically taking care of kids."

Bloom spent three decades working for drugstore giant CVS. When he came to Family Dollar, he said he noticed the company's cheap corporate culture from day one.

"I would sit in meetings and watch presentations, I would miss half of the presentation because they would print on both sides," he said. "I'm like, 'this is brilliant, right?' I'm thinking of where I worked for 31 years. Never did we print on both sides."

Levine said he expects to double the size of his chain in the U.S. He is already a millionaire many times over, but 50 years after he first walked the aisles of his father's store in North Carolina, he still shops there.

"This is what I have brought," he said proudly, holding up a pair of man's pajamas. "Eight dollars, I mean, unbelievable. Where else can you get a value like this?"

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