Dec. 21 (Bloomberg) -- By all accounts, dollar stores are doing quite well. Reports for the third quarter of 2012 show that the largest of them -- Family Dollar Stores Inc., Dollar General Corp. and Dollar Tree Inc. -- 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 cash-strapped 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. (Though Peyser wasn’t the first, as George Husted’s 25 cent store in Harrisburg, Pennsylvania, 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 5 yards of blue denim, two pairs of ladies’ drawers, a heavy-wool man’s shirt, four oversize linen towels, nine bundles of cotton batting or a pair of gloves.
Due to rising prices after the Civil War, such stores soon became so popular as to be a nuisance. In less than a decade, one-price stores appeared in cities across the country, from T.L. Chiek’s Great 49-Cent Store in Peoria, Illinois (“creating tremendous excitement … jammed full from morning until night”), to Theo S. Renard’s 95-Cent Store in Cincinnati (“Over two thousand styles of Bohemian Vases and Toilet Sets, only 95c”), to Valentine’s 99-Cent Store in Omaha, Nebraska. “Dollar stores have become chronic in Boston, ninety-five cent stores are nearly so, and ten cent stores are getting quite numerous; but the newest one is the ninety-nine cent store,” Cincinnati’s Christian Standard newspaper said in an 1871 editorial.
These shops catered to various groups of consumers, not just penny-pinching housewives. In the depression year of 1873, the Yale Courant remarked, “The 99 cent store is becoming a favorite resort for students.” Similarly, the Williams Vidette noted, “Just the knick knacks a student desires are to be found at the ’99 cent’ store in North Adams, and any thing in the store for less than a dollar.” In 1875, editors of the Publishers’ Weekly suggested that 99 cent store merchandise might appeal to the striving classes, as well: “You can get opera chains, enameled slide and tassels, heavy seal charms for gents, Waverley novels, Mrs. Harriet Beecher Stowe novels, solid gold engraved rings, Dr. Holland’s works, sets of dessert-spoons ... all of the choicest poetical works, gilt edge, bound beautifully, in diamond and large edition; beautiful engraved lockets, and other articles too numerous to mention.”
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 traveling salesman who partnered with a Michigan dry-goods store to sell handkerchiefs below cost, at 5 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 5 cents. It was a great success: Together, the higher- and lower-value goods were equally attractive, and people made purchases beyond the 5 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 5 cent counter in action. Stocked with $70 worth of new items made specifically for selling at 5 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 5 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, New York.
By the early 1880s, Woolworth, in partnership with his brother, had expanded into Harrisburg, Scranton and York, Pennsylvania, 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 5 and 10 cent strategy (“no higher”), 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 in which all goods cost the same seemingly low price, whether they are worth it or not.
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 5 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. For now, in our recessed times, the stores continue to be successful, bringing in more people looking for great bargains and cheaper goods, from cans of cat food to packages of underwear and everything in between.
(Wendy Woloson is an independent scholar and consulting historian. Her most recent book is “In Hock: Pawning in America from the Revolution to the Great Depression.” The opinions expressed are her own.)
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