Frugality Mentality: Saving $$ Part 1 – Dollar stores versus Discount stores

This is a new mini-series of non-recipe discussion posts I’m going to try out to see if there’s any interest out there. My purpose for this post is to try to explain the why of how consumers access products, specifically food, and why there are such giant price and availability disparities across the nation. I will be referencing mostly the United States and Canada for much of my info, but will also refer to international resources where you can do more research if you choose.

Times right now are hard for a lot of people; whether it’s unemployment or underemployment, healthcare concerns, rising costs in nearly every sector, or simply the general anxiety and fear of the current global climate, there are a lot of reasons to believe that 2020 has hit many of us negatively…especially in the wallet.

According to Maslow’s Hierarchy of Needs, the most basic human needs are for food, water, warmth, and rest. Due to current world events, many of these critical needs are not currently being met by a significant number of households. For the purpose of this post, I’m going to focus on food needs; specifically food scarcity, food insecurity, and cost versus value.

What is Food Scarcity? A shortage of food may happen when not enough food is produced, such as when crops fail, or the food infrastructure to deliver food to its end destination is interrupted. For more information and a clearer breakdown on the five causes of higher food prices, please check out this interesting article by website The Balance.

What is Food Insecurity? Its the inability to acquire or consume an adequate amount of food in either quantity or quality (in a socially acceptable manner), or the uncertainty that one will be able to do so. This is often linked with a household’s financial ability to access adequate food. More information on food insecurity in America can be found here on the Office of Disease Prevention and Health Promotion (ODPHP) website. For information on Europe, please check out this link from the National Center for Biotechnology Information, U.S. National Library of Medicine.

What is Cost versus Value? There are two types of value we are talking about here: monetary and non-monetary value. In simple terms, monetary value is what value you’re receiving from the money you spend on food for your household.

Monetary: According to data from the United States Department of Agriculture, average annual food-at-home prices in 2019 (the latest numbers available) increased a modest 0.9% from 2018. However, given the current world environment in 2020, the USDA’s current prediction is that the rising prices we as consumers are all seeing will only continue to rise as infrastructure struggles to keep up.

Non-Monetary: Non-monetary—or intrinsic value in this case–can be the nutrition you gain from the food you eat. It’s not a giant leap to understand that when we look at calories versus cost, the foods with the most nutritional value generally have the highest cost. A simplistic way to imagine this is to think of the dollar menu at McDonalds versus the cost of ingredients for a salad. I think we can all agree that the salad is healthier for our bodies, but the McChicken is cheaper, easier to acquire, and quicker to consume.

So how can you be super-thrifty and keep your grocery budget as low as possible for your region, yet still be able to access a reasonable quantity of quality, nutritious food? One of the easiest and most popular ways to do this is to change where we shop, from full-service, convenience, and boutique grocery stores, to stores that sell groceries and pantry staples at a sometimes heavy discount. However, there is a significant difference between discount stores and dollar stores, and a lot of it has to do with their respective pricing strategies.

Dollar Stores

These stores are ubiquitous worldwide, in practically every city in North and South America, Oceania, Asia, and Europe, and even a country or two on the continent of Africa[1]. Few consumers can state they have never once shopped at a dollar store for needed items, and far be it from me to denigrate their utility to those on a budget, tight or otherwise. But there’s a big difference between stopping in at the Dollar Tree, Dollarama, 99 Peso Store or HEMA for a glue stick, a pair of gardening gloves or inexpensive stocking stuffers, versus using these stores to stock up on weekly groceries. Mainly, I’d like you all to be wary of false economy at the dollar store; I’ve identified four main ways that you may be paying more than you think.

1. Weight differential: a bag of potato chips may only be $1 at the dollar store, but their net weight is often less per bag, which leads to a unit cost that can be more expensive than if you spent $0.50 more at a discount store for the same brand. According to the Washington Post in their article “What to buy (and not to buy) at the dollar store”: “Another thing to remember is that you won’t necessarily get the lowest price at dollar stores. ‘In general, dollar stores provide great value,’ says Meaghan Brophy, a senior retail analyst who follows dollar-store trends for FitSmallBusiness.com. ‘But as many items are custom-made in smaller sizes by manufacturers for dollar stores, shoppers need to compare the price against weight, length and size.’.”

In addition, don’t let the size of the bag fool you; sometimes a larger bag will have less product than a smaller one. Always check the net weight listed on the packaging. Check out Clark.com’s report for more examples of shrinking product sizes at the dollar store.

2. Quality differential: generic, off-brand dollar store grocery products themselves, and even some recognizably branded ones, may be of poorer quality than their discount or full-service grocery store counterparts. Often times, generic brands being sold at the dollar store are likely there because other stores or the manufacturers had a hard time moving the products otherwise.

3. Convenience products versus home-made: while this example is more qualitative than quantitative and can be extended to both dollar stores and discount stores equally, it’s still a good lesson in the cost of true frugality. Heavily processed products, as mentioned above, are definitely cheaper and more convenient, but this comes at a price, both health- and wallet-wise. A can of heat and serve baked beans may cost $1 and serve two people, but a 16oz bag of dried beans for the same price can make 10-12 servings and taste a lot better (not to mention contain fewer ingredients and be far healthier for you).

4. Pressure on local grocers: Dollar stores aren’t always good for communities, especially in struggling urban centers with few retail options within reasonable traveling distance. According to the Institute for Local Self-Reliance, dollar stores take a toll on local grocery stores and local small food businesses like fruit and vegetable market kiosks, and by doing so in many cases reduce people’s access to fresh food. Due to the cost of square footage in a downtown urban location and the deliberate small size of most dollar stores (pricing strategy), few dollar stores carry fresh produce, tend to have frozen or perishable aisles, and most offer only a limited selection of highly processed food.

Discount Stores

As popular, if not more so than dollar stores, discount stores such as international chains Aldi and Lidl, and numerous smaller regional discount chains and local discount markets around the world are usually an excellent source of relatively inexpensive groceries. This is especially true if you’re more willing to forego brand names for in-store or lesser-known/local but still reputable brands, as well as stay away from most processed foods. The best advice I ever received from an acquaintance who was teaching me the ways of grocery store frugality, was to only “shop the perimeter” of the store and avoid the middle aisles. The perimeter is where the fresh produce, breads, meats, and frozen items are stored, and the middle aisles are where the highest markups occur and contain the most processed foods.

What’s the difference between a discount store and a department store? With category killers like Wal-Mart, KMart, Giant Tiger in Canada, and giant global membership chains like Costco, Sam’s Club, and the like, the line starts to blur as these chains sell non-food items right alongside groceries, often at well-discounted prices. To be noted, however, is that some of these discounts come at the cost of volume, or bulk buying, which can be hit or miss for many household budgets.

Essentially, discount stores are retail stores that offer merchandise for a discounted price compared to high-end designer stores and department stores. Discount stores can be a type of department store that offers a wide assortment of goods (Wal-Mart, Giant Tiger, Target), while others specialize in selected merchandise (Kohls, Payless), whereas department stores are full-price retail stores that offer various goods and products, and will stock as many items as possible that people might need in their daily routine, to be a sort of “one-stop shop” (Sears, The Hudson Bay Company, Bloomingdale’s, Mark’s & Spencer’s) The cost of this “convenience” of having a one-stop shop is higher prices. For the relevance of this post, I’ve focused on grocery-specific discount stores.

Discount stores, like dollar stores, tend to focus on a streamlined, “no frills” shopping experience in order to help costs stay low, and pass much of these savings down to the consumer. The general quality of the food and fresh produce offered tends to be at an average level; discount stores often only get to choose from available foods and other products after restaurants (first choice) and then higher-end grocery stores that are willing to pay higher prices to have the choicest options. This is starkly compared with dollar stores which will often purchase overstock, poorly-marketed, rejected or unpopular items, and lowest-price-available products. [Note: many modern dollar stores are now sourcing inventory directly from manufacturers, avoiding distributors and their markups altogether, making sweetheart deals in return for volume discounts]. Nothing inherently wrong with this process, but it does lead to high turnover and limited selection for dollar store end-consumers, as volume buying means fewer options for smaller stores.

Discount stores will also often be a better financial “deal” for the consumer; they are keenly aware of the competitive pressure dollar stores have on their business, and they will fight for your grocery dollar. As mentioned above, knowing your unit costs will help you understand the true cost of products; don’t be swayed by the size of the bag or box until you know the actual weight of the product compared to its cost!

In my future posts, I will be offering more direct tips and tricks that will help stretch your grocery budget; look for posts coming soon on saving money on meat, fruit and vegetables, pantry items, and bulk cooking.

If you’d like to read more about foods you should *definitely* NOT purchase at the dollar store, check out this link. If you’d like to know more about the High Cost of cheap food, check out this link. Lastly, check out this link for the real reasons why everything at the dollar store is so cheap.

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