Dollar stores thrive, expand in strapped valley

Cass Holmes is on a mission. Passing racks of Cabbage Patch Kids T-shirts, the Las Vegas woman pushed her cart quickly down the aisle of her newest bargain-hunting ground, the 89 Cent Only store.

"How could you not buy something here?" Holmes asked incredulously, as she took a fleeting glance at retro Justice League superhero gum balls. "This is like a treasure hunt."

And the hunt was on. Holmes looked at a pink-and-black phone case, for 89 cents.

"This is real leather, and it's Swiss Army," she said, pointing to the signature cross on the front.

Holmes also snagged a new skirt for -- you guessed it -- 89 cents.

At 89 Cent Only, 89 cents is the new $1 -- and in tight times, those 11 cents count.

Once a novelty or fodder for jokes, dollar stores have emerged as some of the most successful retail models nationwide, as recession-shocked consumers count every penny. And the stigma about shopping at the lowest of the low-end retailers is also fading.

"You are not seen as poor by going into a dollar store. You are seen as thrifty," said Mary Ann Metz, the manager of the new Dollar Power store in Henderson.

Only in business since June 25, Metz has seen sales pick up as people realize her independent store is open.

Metz believes in the power of the dollar.

"There is a demand for dollar stores," she said. "Some of the prices at regular stores are pretty ridiculous for what you are getting."

Holmes, who works at the Thomas & Mack Center, says the recession just reinforces her frugal nature. "I got that shampoo,'' she exclaimed. "Salon shampoo for 89 cents!"

Smiling broadly, and showing more enthusiasm than most TV infomercial pitchmen, she talked about her new favorite place at 4000 Boulder Highway near Boulder Station.

"I tell everybody about the 89-cent store until they are sick of hearing about it," Holmes said. "I'm a shopaholic, and this satisfies my urge. I can buy a lot of stuff and spend less than $10."

And at the 89-cent store, her ten bucks goes exactly $1.10 further than in a dollar store.

BIG PROFIT IN SMALL MARKUP

In the game of competitive pricing, the 89 Cent Only store is the new low-end leader. It's also a one-off, started last September with about $20,000 invested by owner Diondria Mitchell's uncle. As an independent, it faces stiff competition from as many as 150 dollar and 99-cent stores sprinkled around Southern Nevada, according to estimates from Dollar Store Services, a Las Vegas company that sets up dollar stores.

Staples such as laundry detergent and two-liter soda bottles are among the biggest sellers at the 89 Cent Only Store.

"We opened the store so people could buy the necessities," Mitchell said. "No one should have to choose between washing their clothes and feeding their children."

Dollar Store Services offers to set up the business owner, train them and provide channels for buying merchandise in bulk for about $51,000. However, Mitchell and her uncle did it all on their own.

Declining to give away her buying secrets, she only says that she looks for deals. Some products are overstock merchandise and closeouts. Items such as the laundry detergent come from the same source as the 99 Cent Only chain, but she settles for a smaller markup.

Price isn't the only difference between the 89 Cent Only store and its more expensive competition.

"They don't sell that cheap crap that breaks right after you buy it," Holmes said.

Poor quality merchandise can turn off customers, said John LaFronz, general manager of Dollar Store Service. He warns store operators against stocking inexpensive junk.

"If a customer buys four things for $4 and they break as soon as they get home, they probably won't take them back and complain," he says. "But they won't come back to your store."

Store owners buy inventory from store closeouts, overstocks and eBay sites. While scouring multiple sources for wholesale deals is extra work, store operators say they can still make a profit. At Dollar Power, for example, Metz's profit margin is about 35 percent.

Wal-Mart, the king of the discounters, shares the same parking lot with Dollar Power at the corner of Lake Mead Parkway and Boulder Highway. But Metz doesn't view the superstore as competition. In fact, it helps draw customers who are already looking for a deal, and who skip Wal-Mart when they see Dollar Power.

Shoppers will be seeing even more of the stores soon. Dollar General, which operates 9,500 stores nationwide, has announced plans to open multiple stores in the valley later this year.

And there are more 99 Cent Only stores all the time. That chain opened its 13th Las Vegas Valley store late last month, selling flat-screen TVs for only 99 cents to the first nine customers, creating long lines of eager shoppers in the sweltering summer heat.

Family Dollar opened four new local stores this year, bringing its Southern Nevada tally to 24, according to company spokesman Josh Braverman.

Dollar Tree, a chain with 19 stores in Southern Nevada, plans 300 more stores around the country this year, according to Shelle Davis, a company spokeswoman.

"Times are tough, but people still have birthdays and anniversaries, they still want to specialize the celebration," she said.

WHAT'S IN A NAME?

Unlike the 89 Cent Only store, where everything really is just 89 cents, other "dollar stores" sell some things for more than the name implies.

For independents like Dollar Power, the cost of going it alone has to be passed on to the buyer, Metz said.

"We are one store. We can't sell everything we like for a dollar, because we aren't buying for hundreds of stores like Dollar Tree or the 99 Cent Only stores," she said.

Family Dollar and Dollar General also sell merchandise at different price points, and tend to compete for customers against Wal-Mart.

Dollar General buys from many of the same manufacturers as other discount retailers, but still manages to beat the competition's price, said Tawn Earnest, Dollar General's spokeswoman.

Family Dollar sells a handful of items costing up to $50, such as electronics and toys. However, most goods are $10 or less.

But Dollar Tree and 99 Cent Only stores stay true to their names, and carry only products at those prices or less.

Davis, the Dollar Tree spokeswoman, said shoppers may be turned off if they go into something called a dollar store and get charged $5 or more.

"People want to come in and feel that excitement,'' she said. 'Wow, it is only a dollar!' "

That thrill of the hunt and chance at an unexpected deal is what appeals most to many shoppers.

"You always come in for one thing and buy a bunch of other things," Holmes said while working the aisles at 89 Cent Only.

After all, who could pass up a tote bag left over from the recent Society of Human Resources Management's Las Vegas convention, or a DVD of "Chinese Hercules," for only 89 cents?

So how low can they go?

The 89 Cent Store may not stay the low-price leader, Dollar Power store clerk Jennifer predicts.

"If we hold out long enough, there will be a 9-cent store," she said.

Contact reporter Valerie Miller at vmiller
@lvbusinesspress.com or 702-387-5286.