Incorporating Dollar, Discount, and Convenience Items
Almost ten years ago, when the US economy took a turn for the worse, households across the country turned to dollar and discount stores to save money on everyday purchases such as personal care, beauty, electronic accessories, and household necessities. Shoppers were looking to get the same products at a better value. Many Millennials started shopping for themselves right in the middle of the 2008 economic crisis and grew accustomed to choosing value-priced retailers.
Today, discount and dollar stores are one of the fastest growing sections of the retail industry. This is largely due to increasing consumer interest. Despite the recovering economy, shoppers have grown accustomed to value prices, and actively seek them out. Though these consumers, in theory, can afford to shop at standard price stores, they are increasingly choosing not to do so. According to a report by Reuters, twenty-nine percent of Millennials who shop at Dollar General®, Dollar Tree®, and Family Dollar® are from households earning over $100,000 per year. They also estimate that this same group of shoppers represents twenty-five percent of total sales made by these two brands.
The increased traffic and spending, particularly from a younger demographic, is leading dollar stores to open up more locations in city and urban areas. An increase in dollar store business is good news for flea, fair and swap meet vendors, too. As people are choosing to spend money on experiences such as travel, concerts, and food, shoppers are looking to cut back on everyday items. Flea markets have always been a top destination for customers looking for a bargain and can offer unique products that a chain dollar or discount store cannot.
History of Discount Stores
Discount and value stores first hit the market after World War II. Pent-up demand from wartime shortages, families and soldiers returning home plus increasing consumer confidence led to increased demand for convenient and affordable prices. The same time as department stores were on the rise, discount stores such as Wal-Mart®, Target®, Woolco®, and Kmart® started gaining regional and national traction. The 1970s brought the end of federal fair-trade and price fixing laws. From there, the discount stores we know today started to form. In 1987 discount stores had 42 percent of the overall retail market share. By 2010, discount retailers controlled 87 percent.
Maintaining Profit with Discount Prices
Chain and independent discount retailers are able to offer lower prices on the same goods as regular retailers through several different cost-cutting strategies. Sourcing products at a much lower price point is the most obvious way to keep retail prices at the value level. However, reducing overhead and increasing sales volume are other ways of making value and dollar price points lucrative. As flea, fair, and festival retailers, you already have the advantage of keeping overhead low, especially compared to standalone or chain discount stores.
Just because you’re selling discounted products, doesn’t mean your margins have to suffer. Many wholesalers and liquidators specialize in providing merchandise to value priced markets. By utilizing the best sources, you can keep a 50 percent markup and still have the competitive prices consumers are looking for. Online directories such as WholesaleCentral.com are an easy way to see what types of products are available. Many online wholesale directories have sections dedicated to dollar, convenience or c-store, and closeout merchandise so you can shop by price point.
So, what exactly is a discounted price point? What prices do shoppers expect when they visit a flea market or swap meet for everyday items? Though there is no singular formula for determining the best prices, there are some strategies you can utilize to give yourself a competitive advantage.
1. Anchor Pricing
Anchor pricing gives shoppers a reference point from which to make a purchasing decision. For your market, you could incorporate anchor pricing by showing other vendor’s prices for similar items. Make sure all of your signage is as up-to-date as possible, and that your prices are the lowest. This will help instantaneously show shoppers that you offer the best prices around.
2. Bundle Pricing
If significantly beating out the competition in price isn’t an option consider a bundling pricing strategy. This is especially effective for household items such as toiletries, cleaning supplies, batteries, etc. that people will need to replace again and again. Bundling prices mean you offer a greater discount for purchasing in multiples. Selling in greater volumes will help offset your smaller margins, and buying in bulk offers a better value for the consumer.
3. Psychological Pricing
Basic psychological tactics are the easiest tool you can utilize to give your booth a competitive advantage. Charm pricing is the most common example of psychological pricing. Charm pricing is reducing the price of an item by either a dollar or one penny. For example, instead of $40, the charm price would be $39. Instead of $2, the charm price would be $1.99. Consumers know there is virtually no difference in those prices, however, multiple studies have shown that lowering the first digit on the left significantly impacts subconscious interpretations of the price, and increases chances of purchasing.
4. Pricing for Market Penetration
The goal behind this pricing strategy is to raise consumer awareness of and loyalty to your business by introducing rock bottom prices. Once you have overtaken local competitors and established a regular customer base, slowly start bringing prices up to more profitable margins. This strategy works best with high-traffic markets that attract enough volume and visitors to offset your initial low margins and ensure a higher customer retention rate.
Sourcing Low Prices
At the end of the day, shoppers are looking for low prices. To profitably sell your wares at prices below the competition, you’ll have to be discerning when selecting suppliers. Liquidation, closeout, and off-price suppliers usually have some of the lowest pricing. The tradeoff is you may have to buy in larger volumes or sift through shipments to double check quality before reselling.
The alternative is to source from wholesalers who specialize in discount, dollar, and convenience merchandise. The price may be slightly higher, but in turn, you could purchase new merchandise and have more flexibility with order sizes and display solutions.
Easy Display Solutions
If you’re purchasing from a wholesaler who offers products specifically for dollar, discount, or convenience stores such as energy drinks, lighters, and other small impulse buys, they may have prepackaged counter displays available. Cardboard or plastic counter racks and displays make it easy to introduce one or two new products at a time and will look more professional at your booth.
Flea market vendors conduct over $30 billion in sales each year. Shoppers are flocking to fleas and swap meets year after year for great prices, unique finds, and a dynamic shopping experience. Growing interest in dollar, discount, and convenience items is good news for any value-priced shopping destination. However, when it comes to low prices at local businesses, no one does it better than flea markets. Between bargain-priced staples, wide product selections, and the fun of the market itself, these community-friendly shops fit all the needs of Millennials and other budget-conscious consumers.