Dollar stores back in favor as shoppers look for lowest prices

Dollar stores say they've seen sales of items such as food and grooming products grow the fastest as consumers try to limit spending to just the necessities. (Nick Ut/Associated Press)

PORTLAND, Ore. - A buck will still buy you a bottle of shampoo, two rolls of paper towels, or four containers of generic breath mints at some dollar stores. It even buys a bit of excitement in the hunt for a deal.

But it won't buy motor oil. Or a multipack of Tic Tacs. Or many other items that were once a steal for $1.

Tough economic times have meant a boom in business for many dollar retailers as shoppers hunt for bargains. Most have seen their traffic and sales grow. But the rising cost for goods has some companies examining their offerings more closely.

When oil prices began to tick up a few years ago, several dollar store chains phased motor oil out of their mix. When the cost of Tic Tacs went up last year, Dollar Tree switched to a generic brand so it could continue its four-pack deal. And in September, 99 Cents Only Stores said commodity and fuel prices were forcing it to raise its price for the first time in 26 years, to 99.99 cents - which rounds up to $1 at the register.

Analysts say the dollar represents an accessible, and sometimes disposable, price for shoppers.

"The dollar today is what the penny was to the grandparents' generation," said Marshal Cohen, an analyst for the research firm NPD Group. "When you can get something for a dollar and it works, people get excited."

A bevy of stores are trying to cash in on that, even though many "dollar" stores sell items for a few bucks as well. Family Dollar Stores, for example, says just about 31 percent of the thousands of items in its stores these days are priced at a dollar or less.

McDonald's has a dollar menu that figures heavily in its advertising. Target had a "one spot" fixture for several years, where items sold for a dollar or under, before it was expanded in 2006 to include a larger array of items and pricing.

Dollar stores say they've seen sales of items such as food and grooming products grow the fastest as consumers try to limit spending to just the necessities.

"We feel right for the times, we are relevant," said Chelle Davis, spokeswoman for Dollar Tree Inc. "Who doesn't want to save money?"

Shopper Linda Birmingham said she regularly goes to Dollar Tree in Aloha, Ore., for "little extras" like party supplies or gift bags for her kids. She bought some wax paper for her kitchen, batteries for her son's toy, and a jump rope for her daughter on her most recent visit.

Susan Lance, another shopper in the store that day, said each store carries something different, but she tends to come for the same items that are much cheaper than at the grocery store - disinfectant wipes, toothpaste, and other personal care items.

For the stores, maintaining a compelling product lineup for a dollar can be a challenge.

In the case of 99 Cents Only Stores, the product lineup remains largely the same. But company leaders say the fraction of a penny change will help it balance out some of the losses from rising costs. Unlike many of its competitors, the California-based company has lost money its past two quarters. It also recently said it would close all its Texas stores, which were less profitable than its other operations.