WEBVTT 00:00:00.000 --> 00:00:03.339 You know, when you go to a magic show, I think 00:00:03.339 --> 00:00:05.280 the most impressive tricks are the ones that 00:00:05.280 --> 00:00:07.379 happen right in front of your face. Oh, definitely. 00:00:07.440 --> 00:00:10.099 The close -up stuff. Yeah, exactly. Like, you 00:00:10.099 --> 00:00:13.300 are sitting in the front row, completely focused 00:00:13.300 --> 00:00:15.740 on the magician's wand or the flashy assistant 00:00:15.740 --> 00:00:19.059 or that sudden puff of smoke. Right. But the 00:00:19.059 --> 00:00:22.059 real machinery, like the hidden trap doors, the 00:00:22.059 --> 00:00:24.519 mirrors, the intricate mechanical setup under 00:00:24.519 --> 00:00:27.300 the stage, all of that is completely invisible 00:00:27.300 --> 00:00:29.079 to you. Yeah, you don't see any of it. Right. 00:00:29.309 --> 00:00:31.670 You are looking directly at the illusion, but 00:00:31.670 --> 00:00:34.289 you are entirely missing the underlying reality 00:00:34.289 --> 00:00:37.689 of how it works. It's the ultimate misdirection. 00:00:37.869 --> 00:00:40.689 I mean, your brain just accepts the simple narrative 00:00:40.689 --> 00:00:43.950 being presented, completely ignoring the complex 00:00:43.950 --> 00:00:46.130 physics and mechanics required to actually pull 00:00:46.130 --> 00:00:48.030 the trick off. And that is exactly what it feels 00:00:48.030 --> 00:00:49.869 like when you walk through the automatic sliding 00:00:49.869 --> 00:00:52.939 doors of a local variety store. Oh, wow. A dollar 00:00:52.939 --> 00:00:56.219 store, a pound shop, a hundred yen store, you 00:00:56.219 --> 00:00:57.780 know, whatever you happen to call it in your 00:00:57.780 --> 00:01:00.500 neighborhood. You see shelves stacked with cheap, 00:01:00.619 --> 00:01:04.140 generic candy, plastic storage bins, neon party 00:01:04.140 --> 00:01:06.859 supplies. And you think, OK, this is just a humble, 00:01:07.120 --> 00:01:09.019 low -budget retail operation. Right. You think 00:01:09.019 --> 00:01:11.599 it's just this tiny, simple thing. Exactly. You're 00:01:11.599 --> 00:01:14.519 staring right at the wand. But the hidden trap 00:01:14.519 --> 00:01:17.819 door. The machinery operating behind those $1 00:01:17.819 --> 00:01:21.459 price tags, it is actually a multi -billion dollar 00:01:21.459 --> 00:01:24.379 global leviathan. It really is. So welcome to 00:01:24.379 --> 00:01:27.299 the deep dive. Today, we are working from a comprehensive 00:01:27.299 --> 00:01:30.799 Wikipedia article on variety stores, which I 00:01:30.799 --> 00:01:32.680 know is a topic that sounds incredibly mundane 00:01:32.680 --> 00:01:34.540 on the surface. Yeah, it doesn't sound thrilling 00:01:34.540 --> 00:01:36.959 at first glance. Right. But our mission today 00:01:36.959 --> 00:01:40.140 is to use this source material to unpack that 00:01:40.140 --> 00:01:42.099 hidden machinery. We are going to look at the 00:01:42.099 --> 00:01:44.719 clever economics, the surprisingly varied demographics, 00:01:45.280 --> 00:01:48.180 the historical origins, and the modern real -world 00:01:48.180 --> 00:01:51.909 controversies of these retail giants. just to 00:01:51.909 --> 00:01:53.849 set the stakes for you, to demonstrate just how 00:01:53.849 --> 00:01:56.909 massive this machinery really is. By the year 00:01:56.909 --> 00:02:00.230 2018, dollar and variety store revenue had reached 00:02:00.230 --> 00:02:04.890 $77 billion. Wait, $77 billion? $77 billion. 00:02:05.129 --> 00:02:07.870 And if you want a comparison that truly puts 00:02:07.870 --> 00:02:10.590 that scale into perspective, by 2019, Dollar 00:02:10.590 --> 00:02:12.969 Tree actually generated higher annual sales than 00:02:12.969 --> 00:02:16.090 Macy's. No way. That is, I am still struggling 00:02:16.090 --> 00:02:18.389 to wrap my head around that. Eclipsing Macy's 00:02:18.389 --> 00:02:21.530 by selling like $1 spatulas and greeting cards. 00:02:21.650 --> 00:02:24.569 Yeah. It's wild. Okay, let's unpack this because 00:02:24.569 --> 00:02:26.550 the very first mystery we really have to solve 00:02:26.550 --> 00:02:29.659 here is the math. How on earth do these stores 00:02:29.659 --> 00:02:32.199 actually generate a multi -billion dollar profit? 00:02:32.280 --> 00:02:34.099 Right, the numbers don't seem to add up. Exactly. 00:02:34.340 --> 00:02:36.599 When you are selling consumer goods so cheaply, 00:02:36.800 --> 00:02:39.000 the basic arithmetic of retail just doesn't seem 00:02:39.000 --> 00:02:41.080 to function. Well, the answer comes down to a 00:02:41.080 --> 00:02:44.060 highly engineered dual pronged pricing strategy. 00:02:44.199 --> 00:02:46.599 OK. So the first prong is what you might expect, 00:02:47.000 --> 00:02:50.319 which is massive volume combined with razor thin 00:02:50.319 --> 00:02:52.620 margins. Right. Just selling a ton of stuff. 00:02:52.810 --> 00:02:56.069 Yeah. They are purchasing vast amounts of goods 00:02:56.069 --> 00:02:58.949 at heavily discounted wholesale prices. I mean, 00:02:58.969 --> 00:03:01.189 when you make a fraction of a cent on a plastic 00:03:01.189 --> 00:03:04.210 comb, you need to sell millions of combs to see 00:03:04.210 --> 00:03:07.250 a tangible profit. Millions. Wow. But the volume 00:03:07.250 --> 00:03:10.030 alone isn't enough to beat Macy's. The second 00:03:10.030 --> 00:03:12.509 prong is entirely psychological. They actually 00:03:12.509 --> 00:03:15.069 price certain items higher than traditional supermarkets 00:03:15.069 --> 00:03:18.349 do. Wait, pause. Higher. Yeah. Actually higher. 00:03:18.610 --> 00:03:21.430 But the entire brand identity is built on being 00:03:21.430 --> 00:03:24.080 a discount store. Why would anyone buy something 00:03:24.080 --> 00:03:26.759 there if it costs more? Because of a cognitive 00:03:26.759 --> 00:03:29.500 bias known as the halo effect. The halo effect. 00:03:29.740 --> 00:03:31.939 Right. When a consumer walks into a store that 00:03:31.939 --> 00:03:34.400 is heavily branded around massive discounts, 00:03:35.000 --> 00:03:37.240 the brain simply assumes that everything in the 00:03:37.240 --> 00:03:39.479 store is a bargain. Oh, I see. So you grab a 00:03:39.479 --> 00:03:42.520 roll of packing tape or a basic kitchen utensil, 00:03:42.659 --> 00:03:45.560 assuming it is a steal. But in reality, the store 00:03:45.560 --> 00:03:47.939 has applied a massive markup compared to what? 00:03:48.020 --> 00:03:52.039 Like a standard big box retailer? charges for 00:03:52.039 --> 00:03:54.520 the exact same item. Oh, man. It is like a retail 00:03:54.520 --> 00:03:56.659 optical illusion. They construct an environment 00:03:56.659 --> 00:03:59.599 that completely tricks the shopper's brain into 00:03:59.599 --> 00:04:01.719 feeling like they're getting away with a heist. 00:04:01.780 --> 00:04:04.680 Yeah. You buy a tiny travel sized bottle of a 00:04:04.680 --> 00:04:07.360 name brand body wash for a dollar and you feel 00:04:07.360 --> 00:04:09.879 victorious. You feel great about it. Right. But 00:04:09.879 --> 00:04:12.500 if you actually do the math. and calculate the 00:04:12.500 --> 00:04:15.419 price per ounce, it is way more expensive than 00:04:15.419 --> 00:04:17.459 just buying the bulk bottle at a standard grocery 00:04:17.459 --> 00:04:20.100 store. Yeah. And that phenomenon is called shrink 00:04:20.100 --> 00:04:23.060 flation. And it is a core tactic for hitting 00:04:23.060 --> 00:04:26.079 those fixed single price points like one dollar 00:04:26.079 --> 00:04:28.920 or one pound. Just shrinking the package. Exactly. 00:04:29.300 --> 00:04:31.480 To maintain that fixed price on the shelf, the 00:04:31.480 --> 00:04:34.040 supply chain has to get very creative. They reduce 00:04:34.040 --> 00:04:36.319 the package size or they use generic private 00:04:36.319 --> 00:04:38.500 labels manufactured with significantly cheaper 00:04:38.500 --> 00:04:41.000 materials. Makes sense. But beyond that, The 00:04:41.000 --> 00:04:43.899 source details how they rely on alternative supply 00:04:43.899 --> 00:04:46.540 networks. They source overruns, bankruptcy stock, 00:04:46.839 --> 00:04:49.600 and they tap heavily into the gray market. I 00:04:49.600 --> 00:04:51.759 need you to define those terms because they sound 00:04:51.759 --> 00:04:54.120 vaguely illicit. What is the difference between 00:04:54.120 --> 00:04:57.139 an overrun, bankruptcy stock, and the gray market? 00:04:57.519 --> 00:05:00.889 Let's break down the mechanics of each. So overruns 00:05:00.889 --> 00:05:03.470 happen when a manufacturer simply produces too 00:05:03.470 --> 00:05:05.550 much of a product. Like they just overshot the 00:05:05.550 --> 00:05:08.709 target. Right. Say a massive batch of seasonal 00:05:08.709 --> 00:05:10.930 paper plates and they need to liquidate that 00:05:10.930 --> 00:05:13.490 excess inventory quickly to free up warehouse 00:05:13.490 --> 00:05:16.449 space. Okay. Then there's bankruptcy stock or 00:05:16.449 --> 00:05:19.949 closeout stock. That occurs when a different 00:05:19.949 --> 00:05:23.209 retail chain fails. Oh, wow. Yeah. The variety 00:05:23.209 --> 00:05:26.069 store swoops in and buys the failed company's 00:05:26.069 --> 00:05:28.149 remaining inventory for pennies on the dollar. 00:05:28.310 --> 00:05:31.689 Okay. Those make total sense. You are just capitalizing 00:05:31.689 --> 00:05:34.470 on someone else's miscalculation or misfortune. 00:05:34.910 --> 00:05:37.110 But what about the gray market? That sounds like 00:05:37.110 --> 00:05:38.949 something out of a spy movie. It does, right. 00:05:39.129 --> 00:05:41.810 But the gray market just involves buying legitimate, 00:05:42.050 --> 00:05:44.449 authentic goods outside of the brand's intended 00:05:44.449 --> 00:05:47.670 distribution channels. OK, like that. Well, let's 00:05:47.670 --> 00:05:50.589 say a major cosmetics brand manufactures a specific 00:05:50.589 --> 00:05:53.649 shampoo meant exclusively for the Eastern European 00:05:53.649 --> 00:05:56.649 market. And it's priced lower for that specific 00:05:56.649 --> 00:05:59.689 economy. OK, I fall. A third party broker might 00:05:59.689 --> 00:06:02.410 buy massive quantities of that shampoo in Europe, 00:06:02.910 --> 00:06:05.410 ship it across the ocean and sell it to a US 00:06:05.410 --> 00:06:08.579 dollar store. Wow. Is that even allowed? The 00:06:08.579 --> 00:06:11.939 product is totally real and legal, but the original 00:06:11.939 --> 00:06:14.839 brand never intended for it to be sold in an 00:06:14.839 --> 00:06:17.160 American discount store. It allows the variety 00:06:17.160 --> 00:06:19.860 store to offer name brand recognition at a fractured 00:06:19.860 --> 00:06:22.740 cost. That is fascinating. But you know, the 00:06:22.740 --> 00:06:24.579 source material brought up one sourcing tactic 00:06:24.579 --> 00:06:26.860 that genuinely made me pause. Oh really? Which 00:06:26.860 --> 00:06:29.079 one? It mentioned a regional dollar store in 00:06:29.079 --> 00:06:31.980 the Syracuse, New York area called Real Deals. 00:06:32.259 --> 00:06:34.339 According to the article, they stock their shelves 00:06:34.339 --> 00:06:37.000 almost entirely with surplus items and out -of 00:06:37.000 --> 00:06:39.680 -date food products. Oh yes, the expired food. 00:06:39.939 --> 00:06:42.459 I am deeply confused by this. Selling expired 00:06:42.459 --> 00:06:44.800 food, how does a health inspector not shut that 00:06:44.800 --> 00:06:47.399 down immediately? Well, this is a perfect example 00:06:47.399 --> 00:06:49.860 of how global supply chains collide with highly 00:06:49.860 --> 00:06:53.040 specific local jurisdictions. In the United States, 00:06:53.420 --> 00:06:56.060 with a few state -by -state exceptions for highly 00:06:56.060 --> 00:06:58.699 perishable items like infant formula or certain 00:06:58.699 --> 00:07:01.399 dairy products, it is generally perfectly legal 00:07:01.399 --> 00:07:04.139 to sell food past its printed date. Wait, how 00:07:04.139 --> 00:07:06.459 is that possible? Yeah, does the expiration date 00:07:06.459 --> 00:07:10.079 just mean nothing? Kind of. Under the FDA guidelines, 00:07:10.480 --> 00:07:14.339 those dates like sell by or best if used by are 00:07:14.339 --> 00:07:16.899 generally treated as manufacturer suggestions 00:07:16.899 --> 00:07:20.379 for peak quality. They aren't strict safety deadlines. 00:07:20.779 --> 00:07:23.639 Are you serious? Yeah. The manufacturer is simply 00:07:23.639 --> 00:07:25.699 stating that the crackers might be a bit stale 00:07:25.699 --> 00:07:27.500 after that date, not that they are dangerous. 00:07:28.160 --> 00:07:31.339 So a store like Real Deals can legally buy that 00:07:31.339 --> 00:07:33.860 expired stock from traditional grocery stores 00:07:33.860 --> 00:07:37.100 at a massive discount and resell it. Wow. I am 00:07:37.100 --> 00:07:39.339 assuming that standard does not fly everywhere. 00:07:39.579 --> 00:07:41.699 Oh, not at all. In the United Kingdom, the legal 00:07:41.699 --> 00:07:44.060 mechanism is entirely different. It is strictly 00:07:44.060 --> 00:07:46.980 illegal to sell goods after they're printed use 00:07:46.980 --> 00:07:48.779 by date. Right. That makes more sense to me. 00:07:48.839 --> 00:07:50.720 Yeah, a health and safety inspector would absolutely 00:07:50.720 --> 00:07:53.180 shut that down over there. So a business model 00:07:53.180 --> 00:07:55.879 relying on expired food simply could not exist 00:07:55.879 --> 00:07:58.620 in the UK. The underlying machinery of the store 00:07:58.620 --> 00:08:01.220 has to adapt to the legal reality of its specific 00:08:01.220 --> 00:08:03.680 region. OK, so the picture is becoming clear. 00:08:04.300 --> 00:08:06.579 We understand the mechanisms of how they are 00:08:06.579 --> 00:08:09.399 generating these profits. The tiny margins on 00:08:09.399 --> 00:08:12.560 huge volume, the psychological halo effect, the 00:08:12.560 --> 00:08:15.139 gray market sourcing, and even leveraging legal 00:08:15.139 --> 00:08:17.639 loopholes on food dates. Right. It's a complex 00:08:17.639 --> 00:08:20.500 machine. It really is. But if we follow the logic, 00:08:20.720 --> 00:08:22.519 that brings us to the next piece of the puzzle. 00:08:22.699 --> 00:08:26.100 If the economics rely entirely on moving sheer, 00:08:26.199 --> 00:08:29.120 massive volume, they can't just be selling to 00:08:29.120 --> 00:08:31.759 a tiny niche of people. No, definitely not. So 00:08:31.759 --> 00:08:33.960 who is actually keeping these places in business? 00:08:34.440 --> 00:08:36.639 Well, if we look at the data provided in the 00:08:36.639 --> 00:08:39.360 sources, we really have to completely dismantle 00:08:39.360 --> 00:08:42.080 a very common cultural stereotype. OK, let's 00:08:42.080 --> 00:08:44.340 do it. A vast majority of people link variety 00:08:44.340 --> 00:08:46.820 stores exclusively with low -income neighborhoods 00:08:46.820 --> 00:08:50.360 or economically depressed areas. But the demographic 00:08:50.360 --> 00:08:52.990 reality is actually much broader. I actually 00:08:52.990 --> 00:08:55.029 highlighted a prime example of this from the 00:08:55.029 --> 00:08:57.570 article because it seems so out of place. Atherton, 00:08:57.570 --> 00:09:00.330 California. Oh, yes. For context, Atherton is 00:09:00.330 --> 00:09:02.450 a town with a median household income of nearly 00:09:02.450 --> 00:09:06.570 $185 ,000 a year. It is literally one of the 00:09:06.570 --> 00:09:08.909 wealthiest areas in the country. Huge money. 00:09:09.110 --> 00:09:11.850 Right. And yet there is a variety store sitting 00:09:11.850 --> 00:09:14.889 right there within its city limits. I mean, if 00:09:14.889 --> 00:09:16.970 you are bringing home almost 200 grand a year, 00:09:17.370 --> 00:09:19.850 you are not struggling to afford name brand paper 00:09:19.850 --> 00:09:22.450 towels. No. Well, you're really not. Is this 00:09:22.450 --> 00:09:24.870 less about people needing to shop there and more 00:09:24.870 --> 00:09:26.990 about the human psychology of loving a treasure 00:09:26.990 --> 00:09:29.710 hunt? That is exactly what it is. It comes down 00:09:29.710 --> 00:09:31.830 to the human psychology of the treasure hunt. 00:09:32.009 --> 00:09:35.690 For that demographic, it is experiential retail 00:09:35.690 --> 00:09:38.429 masquerading as discount shopping. Experiential 00:09:38.429 --> 00:09:40.610 retail. I like that. Think about the sourcing 00:09:40.610 --> 00:09:43.549 mechanisms we just discussed. The overruns, the 00:09:43.549 --> 00:09:46.889 closeout stock from bankruptcies, the gray market 00:09:46.889 --> 00:09:50.080 imports. Because of how they source, the inventory 00:09:50.080 --> 00:09:52.639 on the shelves is constantly rotating. It's unpredictable. 00:09:52.980 --> 00:09:54.679 You never know what's going to be there on a 00:09:54.679 --> 00:09:57.379 Tuesday versus a Friday. Precisely. You might 00:09:57.379 --> 00:10:00.860 walk in and find a weird, obscure brand of imported 00:10:00.860 --> 00:10:04.200 European cookies or a surprisingly well -made 00:10:04.200 --> 00:10:07.779 ceramic mug for a single coin. Finding that item 00:10:07.779 --> 00:10:09.820 triggers a dopamine hit. Right. It feels like 00:10:09.820 --> 00:10:12.200 a victory. It's a completely different psychological 00:10:12.200 --> 00:10:15.179 driver than walking into a standard grocery store 00:10:15.179 --> 00:10:18.159 with a strict predictable list of weekly tours. 00:10:18.659 --> 00:10:21.139 It becomes entertainment. And it isn't just an 00:10:21.139 --> 00:10:23.799 American phenomenon either. The source noted 00:10:23.799 --> 00:10:26.639 that in Great Britain following the 2008 financial 00:10:26.639 --> 00:10:29.840 crisis, the chain ninety nine P stores reported 00:10:29.840 --> 00:10:33.019 a highly notable increase in higher income customers 00:10:33.019 --> 00:10:35.279 walking through their doors. Yeah, that was a 00:10:35.279 --> 00:10:38.279 massive shift. It was as if the economic crash. 00:10:38.429 --> 00:10:41.350 gave wealthy people cultural permission to seek 00:10:41.350 --> 00:10:44.049 out that bargain hunting dopamine hit. Exactly. 00:10:44.409 --> 00:10:46.789 The stigma evaporated and the entertainment value 00:10:46.789 --> 00:10:49.210 of the treasure hunt remained. But you know, 00:10:49.409 --> 00:10:52.990 it is easy to view these stores as a fun, quirky 00:10:52.990 --> 00:10:55.490 treasure hunt when you live in a wealthy enclave 00:10:55.490 --> 00:10:57.789 like Atherton or when you treat it as a novelty. 00:10:57.929 --> 00:11:00.570 Sure. But that dopamine hit completely vanishes 00:11:00.570 --> 00:11:02.570 when the variety store is literally the only 00:11:02.570 --> 00:11:04.929 place in your town to buy dinner. Yeah, that 00:11:04.929 --> 00:11:07.820 changes things entirely. And that reality brings 00:11:07.820 --> 00:11:12.940 us to a major real -world controversy. When these 00:11:12.940 --> 00:11:15.320 stores set up shop in vulnerable neighborhoods, 00:11:15.879 --> 00:11:18.279 they're no longer a quirky place to buy cheap 00:11:18.279 --> 00:11:21.379 party balloons. They become the primary infrastructure 00:11:21.379 --> 00:11:23.700 for food. And this raises an important question 00:11:23.700 --> 00:11:26.460 regarding how local retail ecosystems balance 00:11:26.460 --> 00:11:28.960 aggressive corporate expansion with community 00:11:28.960 --> 00:11:31.690 health. The core of this controversy centers 00:11:31.690 --> 00:11:34.590 around the concept of food deserts. A food desert 00:11:34.590 --> 00:11:37.110 is a geographic area where residents have highly 00:11:37.110 --> 00:11:39.909 limited or nonexistent access to affordable, 00:11:40.450 --> 00:11:43.429 nutritious, and healthy food, particularly fresh 00:11:43.429 --> 00:11:45.909 produce and raw meats. And the allegation, which 00:11:45.909 --> 00:11:47.789 is backed up by various studies and community 00:11:47.789 --> 00:11:49.570 organizations mentioned in our source material, 00:11:50.009 --> 00:11:52.509 is that dollar stores actually manufacture these 00:11:52.509 --> 00:11:55.470 food deserts. The mechanism they point to is 00:11:55.470 --> 00:11:58.110 predatory competition. The argument is that a 00:11:58.110 --> 00:12:00.789 dollar store moves into a neighborhood and sells 00:12:00.789 --> 00:12:04.370 heavily processed, highly packaged foods at rock 00:12:04.370 --> 00:12:07.350 bottom prices. And the local independent grocery 00:12:07.350 --> 00:12:10.850 store simply cannot compete with those multinational 00:12:10.850 --> 00:12:13.590 supply chain margins on canned goods, so the 00:12:13.590 --> 00:12:16.190 grocer eventually goes bankrupt. Once the grocer 00:12:16.190 --> 00:12:18.529 is gone, the dollar store is the only option 00:12:18.529 --> 00:12:20.960 left. And because the traditional variety store 00:12:20.960 --> 00:12:23.759 model is not engineered to maintain the complex, 00:12:23.919 --> 00:12:26.139 expensive refrigerated supply chains required 00:12:26.139 --> 00:12:28.860 to stock fresh produce, the community is left 00:12:28.860 --> 00:12:31.720 with nothing but aisles of shelf stable snacks, 00:12:32.200 --> 00:12:35.080 canned goods and processed meals. Which is devastating 00:12:35.080 --> 00:12:37.960 for local health. It creates a fundamental structural 00:12:37.960 --> 00:12:41.299 shift in the local food economy, severely limiting 00:12:41.299 --> 00:12:44.100 dietary choices. But the source material is very 00:12:44.100 --> 00:12:45.740 clear that we have to look at both sides of this 00:12:45.740 --> 00:12:49.039 dynamic. Dollar Tree has explicitly and publicly 00:12:49.039 --> 00:12:51.200 disputed this claim. Yes, they pushed back hard 00:12:51.200 --> 00:12:53.139 on this. Their counter argument is that they 00:12:53.139 --> 00:12:55.139 are not the ones destroying local grocery stores. 00:12:55.559 --> 00:12:57.639 They argue that they are specifically opening 00:12:57.639 --> 00:12:59.940 up locations in areas where traditional grocers 00:12:59.940 --> 00:13:02.240 have already abandoned the population because 00:13:02.240 --> 00:13:04.299 the grocers couldn't make the margins work. From 00:13:04.299 --> 00:13:06.639 the corporate perspective, they are not creating 00:13:06.639 --> 00:13:09.879 the desert. They are bringing an oasis of affordable 00:13:09.879 --> 00:13:13.080 calories into a void that already existed. The 00:13:13.080 --> 00:13:15.980 debate over causality is intense. It is fundamentally 00:13:15.980 --> 00:13:18.299 a question of whether the variety store is the 00:13:18.299 --> 00:13:20.259 catalyst for the community's retail collapse 00:13:20.259 --> 00:13:23.500 or merely a symptom of a broader economic abandonment. 00:13:23.639 --> 00:13:25.200 So what does this all mean? Are these stores 00:13:25.200 --> 00:13:27.519 the cause of the grocery void or are they just 00:13:27.519 --> 00:13:30.460 filling a vacuum left by other businesses? It's 00:13:30.460 --> 00:13:33.340 incredibly difficult to say for sure. But regardless 00:13:33.340 --> 00:13:36.519 of the cause, the real world fallout is tangible. 00:13:36.860 --> 00:13:39.679 In response to these allegations, numerous municipalities 00:13:39.679 --> 00:13:42.779 and even U .S. stoats have passed specific zoning 00:13:42.779 --> 00:13:45.559 restrictions. Interesting. Yeah. These laws are 00:13:45.559 --> 00:13:47.899 designed to limit where new dollar stores can 00:13:47.899 --> 00:13:50.740 open, specifically to prevent them from clustering 00:13:50.740 --> 00:13:53.059 in vulnerable neighborhoods and overwhelming 00:13:53.059 --> 00:13:55.679 whatever independent retail remains. It's a really 00:13:55.679 --> 00:13:58.059 complex cycle to untangle. Are they the cause 00:13:58.059 --> 00:14:01.879 of the void or just filling the vacuum? There 00:14:01.879 --> 00:14:04.779 is a specific detail from 2023 in the source 00:14:04.779 --> 00:14:06.799 that I think perfectly illustrates the danger 00:14:06.799 --> 00:14:08.960 of relying on them to fill that vacuum. Oh, right. 00:14:09.240 --> 00:14:13.200 It involves literal eggs. Ah, yes. The global 00:14:13.200 --> 00:14:16.870 egg inflation of 2023. This is a perfect case 00:14:16.870 --> 00:14:20.149 study of the model's limitations. Right. So massive 00:14:20.149 --> 00:14:23.330 inflation hits the agricultural sector, and the 00:14:23.330 --> 00:14:25.809 wholesale price of eggs skyrockets globally. 00:14:26.009 --> 00:14:28.330 It was a huge spike. Now, if you are a traditional 00:14:28.330 --> 00:14:30.570 grocery store, you have to keep selling eggs. 00:14:30.990 --> 00:14:33.909 They are a fundamental dietary staple. You just 00:14:33.909 --> 00:14:35.850 absorb some of the cost, or you pass the higher 00:14:35.850 --> 00:14:38.389 price onto the consumer. But what did Dollar 00:14:38.389 --> 00:14:41.470 Tree do? They reportedly just stopped selling 00:14:41.470 --> 00:14:43.710 eggs altogether. They dropped the product because 00:14:43.710 --> 00:14:46.289 the mechanism of their business model demanded 00:14:46.289 --> 00:14:48.929 it. Just like that? Yeah. If the wholesale price 00:14:48.929 --> 00:14:51.669 of an item exceeds their fixed retail price point, 00:14:51.970 --> 00:14:54.129 or if it cuts too deeply into their required 00:14:54.129 --> 00:14:56.529 profit margin, they simply remove it from the 00:14:56.529 --> 00:14:59.149 supply chain. Wow. They are not tethered to the 00:14:59.149 --> 00:15:01.210 social contract of being a full -service grocer. 00:15:01.610 --> 00:15:04.350 Their primary loyalty, structurally, is to their 00:15:04.350 --> 00:15:06.950 margin and their rigid pricing model, not to 00:15:06.950 --> 00:15:08.919 providing a complete nutritional diet for the 00:15:08.919 --> 00:15:11.600 local community. Which perfectly highlights the 00:15:11.600 --> 00:15:14.659 immense vulnerability of a town that relies entirely 00:15:14.659 --> 00:15:17.960 on a discount variety model for its daily sustenance. 00:15:18.360 --> 00:15:20.080 I mean, if the math doesn't work for corporate, 00:15:20.480 --> 00:15:22.799 your town just doesn't get eggs anymore. Exactly. 00:15:22.940 --> 00:15:25.419 It is an incredible amount of power for a discount 00:15:25.419 --> 00:15:28.679 store to hold. To really grasp how a concept 00:15:28.679 --> 00:15:31.240 built on selling cheap trinkets gained the power 00:15:31.240 --> 00:15:34.100 to reshape municipal zoning laws and dictate 00:15:34.100 --> 00:15:36.419 local diets, we really have to look backwards. 00:15:36.460 --> 00:15:38.960 We do. We need context. Right. We need to look 00:15:38.960 --> 00:15:42.000 at their history and how this retail model actually 00:15:42.000 --> 00:15:44.500 conquered the globe. Well, the origins of this 00:15:44.500 --> 00:15:47.059 machinery date back much further than most people 00:15:47.059 --> 00:15:49.919 realize. We can trace the DNA of the modern variety 00:15:49.919 --> 00:15:53.639 store back to February 20 tech 1879 in Utica, 00:15:53.759 --> 00:15:56.500 New York. Okay, 1879. A man named Frank Winfield 00:15:56.500 --> 00:15:59.120 Woolworth opened what he called his great five 00:15:59.120 --> 00:16:01.220 cents store. Oh, the original five and dime. 00:16:01.639 --> 00:16:04.480 Exactly. But why was that revolutionary in 1879? 00:16:04.580 --> 00:16:06.759 Weren't there already? general stores selling 00:16:06.759 --> 00:16:09.399 cheap goods back then. There were, but the prevailing 00:16:09.399 --> 00:16:11.759 economic wisdom of the 19th century was that 00:16:11.759 --> 00:16:14.299 a retail storefront could not possibly survive 00:16:14.299 --> 00:16:17.399 by exclusively selling low price goods. Oh, they 00:16:17.399 --> 00:16:20.139 thought you needed a mix. Right. Economists believed 00:16:20.139 --> 00:16:22.559 you needed the high profit margins of big ticket 00:16:22.559 --> 00:16:25.919 items like furniture or farm equipment to subsidize 00:16:25.919 --> 00:16:28.000 the cost of keeping the lights on. Makes sense. 00:16:28.220 --> 00:16:30.860 But Woolworth proved the skeptics wrong by engineering 00:16:30.860 --> 00:16:33.909 a new mechanism. He proved that if you keep overhead 00:16:33.909 --> 00:16:36.750 aggressively low, cut out the middlemen, and 00:16:36.750 --> 00:16:39.909 drive volume astronomically high, the nickel 00:16:39.909 --> 00:16:42.909 store could thrive all on its own. It spawned 00:16:42.909 --> 00:16:46.250 an entire industry. And the names from that era 00:16:46.250 --> 00:16:50.450 became legendary. S .S. Kredge, which eventually 00:16:50.450 --> 00:16:52.950 morphed into Kmart. Walton's Five and Dime in 00:16:52.950 --> 00:16:55.649 Arkansas, which was the precursor to the Walmart 00:16:55.649 --> 00:16:58.350 empire. Massive legacies. But the Five and Dime 00:16:58.350 --> 00:17:01.379 era didn't last forever. Our source notes a major 00:17:01.379 --> 00:17:03.919 shift in the mid -20th century. As consumers 00:17:03.919 --> 00:17:06.880 moved out to the suburbs in the 1950s and 60s, 00:17:07.160 --> 00:17:09.359 shopping habits shifted to massive indoor shopping 00:17:09.359 --> 00:17:12.359 malls. Right, the mall boom. Yeah, and the traditional 00:17:12.359 --> 00:17:14.819 variety stores tried to adapt. But they started 00:17:14.819 --> 00:17:17.299 losing ground to specialized discount drug stores 00:17:17.299 --> 00:17:20.019 and massive big -box retailers that could offer 00:17:20.019 --> 00:17:23.140 wider selections. The last U .S. Woolworths actually 00:17:23.140 --> 00:17:26.960 closed its doors in 1997. But 1997 is right around 00:17:26.960 --> 00:17:29.140 the time the concept was being resurrected with 00:17:29.140 --> 00:17:31.859 a highly strategic pivot. Oh, really? Yeah. The 00:17:31.859 --> 00:17:35.579 late 1990s saw a massive resurgence in the dollar 00:17:35.579 --> 00:17:38.339 store model, but they completely changed their 00:17:38.339 --> 00:17:41.000 real estate strategy. Instead of trying to anchor 00:17:41.000 --> 00:17:44.019 themselves in massive suburban malls where the 00:17:44.019 --> 00:17:46.279 rent was high and the competition was fierce, 00:17:46.799 --> 00:17:49.440 the new generation focused on freestanding locations. 00:17:49.500 --> 00:17:51.559 Oh, that makes so much sense. They placed themselves 00:17:51.559 --> 00:17:54.849 in rural small towns, neglected downtown. and 00:17:54.849 --> 00:17:57.509 convenient neighborhood corners where big box 00:17:57.509 --> 00:18:00.289 stores simply couldn't fit. They offered speed 00:18:00.289 --> 00:18:02.930 and localized convenience. Here's where it gets 00:18:02.930 --> 00:18:05.349 really interesting, though. The strategic resurrection 00:18:05.349 --> 00:18:08.279 isn't just an American phenomenon. While the 00:18:08.279 --> 00:18:10.740 U .S. was blanketing small towns with freestanding 00:18:10.740 --> 00:18:13.559 dollar stores in the 90s, the rest of the world 00:18:13.559 --> 00:18:15.960 was developing their own distinct versions of 00:18:15.960 --> 00:18:18.279 this economic machine. Oh, absolutely. It's a 00:18:18.279 --> 00:18:20.819 global story. And there's a wild paradox in how 00:18:20.819 --> 00:18:23.039 they grew. You look at Japan, they have the 100 00:18:23.039 --> 00:18:25.519 yen shops. The biggest player there is Daiso, 00:18:25.539 --> 00:18:28.660 which opened its first store in 1991 and now 00:18:28.660 --> 00:18:31.440 operates around 2 ,400 stores just within Japan. 00:18:31.759 --> 00:18:35.000 2 ,400. It's staggering. Right. But I notice 00:18:35.000 --> 00:18:38.359 in the timeline, Those stores didn't truly proliferate 00:18:38.359 --> 00:18:41.480 and become a massive cultural staple until around 00:18:41.480 --> 00:18:45.319 2001. That is, right in the aftermath of Japan's 00:18:45.319 --> 00:18:48.440 lost decade, which was a brutal, long -lasting 00:18:48.440 --> 00:18:51.170 economic recession. How did the retail chain 00:18:51.170 --> 00:18:53.809 experience explosive growth during a historic 00:18:53.809 --> 00:18:56.890 recession? It is because economic downturns act 00:18:56.890 --> 00:18:59.369 as rocket fuel for the fixed -price variety store 00:18:59.369 --> 00:19:02.250 industry. Rocket fuel? Yes. During Japan's lost 00:19:02.250 --> 00:19:04.670 decade, the broader economy suffered severe deflation, 00:19:05.009 --> 00:19:07.230 and consumers lost a massive amount of spending 00:19:07.230 --> 00:19:09.769 power. Traditional retailers were collapsing, 00:19:10.250 --> 00:19:13.369 but Daiso utilized a brilliant supply chain mechanism. 00:19:13.970 --> 00:19:16.309 They shifted their manufacturing heavily to China, 00:19:16.450 --> 00:19:18.569 where labor and materials were drastically cheaper. 00:19:18.670 --> 00:19:21.440 Oh, wow. Because they maintained the fixed 100 00:19:21.440 --> 00:19:24.200 yen price point, but their internal costs plummeted, 00:19:24.279 --> 00:19:26.599 their margins actually expanded, they were offering 00:19:26.599 --> 00:19:29.220 incredible relative value to a struggling population 00:19:29.220 --> 00:19:31.940 while remaining highly profitable. We see this 00:19:31.940 --> 00:19:34.220 pattern repeatedly. We saw the exact same mechanism 00:19:34.220 --> 00:19:37.420 with the 99p stores in the UK reporting a surge 00:19:37.420 --> 00:19:40.019 of customers after the 2008 global financial 00:19:40.019 --> 00:19:42.950 crash. And look at China's own version. The Chain 00:19:42.950 --> 00:19:45.730 Manisa, which sells cosmetics, stationery, and 00:19:45.730 --> 00:19:49.150 household goods, reached $1 .5 billion in revenue 00:19:49.150 --> 00:19:52.410 by 2016 and now operates in over 80 countries. 00:19:53.230 --> 00:19:54.930 It almost sounds like the fixed -price retail 00:19:54.930 --> 00:19:57.750 model is built like a deep -sea submarine. A 00:19:57.750 --> 00:20:00.069 submarine? How do you mean? Well, a deep -sea 00:20:00.069 --> 00:20:02.630 submarine is engineered to survive under immense 00:20:02.630 --> 00:20:05.750 downward pressure. In the retail world, that 00:20:05.750 --> 00:20:08.519 downward pressure is an economic recession. The 00:20:08.519 --> 00:20:10.839 worse the economy gets, the more the submarine 00:20:10.839 --> 00:20:12.859 thrives in its natural environment. That's a 00:20:12.859 --> 00:20:15.000 great way to put it. But if you take that same 00:20:15.000 --> 00:20:17.519 submarine and rapidly bring it to the surface 00:20:17.519 --> 00:20:20.599 or introduce intense internal pressure -like 00:20:20.599 --> 00:20:23.779 rapid uncontrollable inflation, the rigid hull 00:20:23.779 --> 00:20:26.359 can't handle it. It just implodes. That is a 00:20:26.359 --> 00:20:29.000 surprisingly accurate way to visualize the vulnerability 00:20:29.000 --> 00:20:31.319 of the model. And we actually have historical 00:20:31.319 --> 00:20:34.019 proof of that exact implosion in the source material. 00:20:34.220 --> 00:20:36.440 Really? Where? The history of the Dutch chain 00:20:36.440 --> 00:20:39.119 HEMA provides a great cautionary tale. HEMA started 00:20:39.119 --> 00:20:41.400 in the Netherlands selling goods at strict standard 00:20:41.400 --> 00:20:44.420 prices of 10, 25, or 50 cents. It was a massive 00:20:44.420 --> 00:20:47.460 success for years. But after the economic devastation 00:20:47.460 --> 00:20:51.079 of World War II, the rigid, fixed -price submarine 00:20:51.079 --> 00:20:54.329 could not withstand the pressure. Severe inflation 00:20:54.329 --> 00:20:56.789 and global supply chain disruptions forced them 00:20:56.789 --> 00:20:59.369 to abandon the standard pricing system entirely. 00:20:59.789 --> 00:21:02.849 They survived, but only by pivoting their business 00:21:02.849 --> 00:21:05.210 model away from fixed prices. Which really brings 00:21:05.210 --> 00:21:07.769 us full circle. From Woolworth's five -cent store 00:21:07.769 --> 00:21:11.369 in 1879, to the massive expansion of dollar stores 00:21:11.369 --> 00:21:14.789 in the 90s, to Japan's 100 yen shops thriving 00:21:14.789 --> 00:21:18.309 in a recession, the model is deeply, fundamentally 00:21:18.309 --> 00:21:20.950 embedded in the global economy. It really is. 00:21:21.130 --> 00:21:23.190 And if we synthesize all the mechanisms we have 00:21:23.190 --> 00:21:25.670 discussed today, what we are looking at is a 00:21:25.670 --> 00:21:28.529 retail format that is an absolute master class 00:21:28.529 --> 00:21:30.970 in consumer psychology, supply chain economics, 00:21:31.190 --> 00:21:33.650 and corporate adaptability. They have engineered 00:21:33.650 --> 00:21:36.369 a system that turns literal punnies of margin 00:21:36.369 --> 00:21:38.750 on generic goods into billions of dollars of 00:21:38.750 --> 00:21:41.130 revenue. They have decoded the human desire for 00:21:41.130 --> 00:21:43.430 the treasure hunt, attracting shoppers across 00:21:43.430 --> 00:21:45.809 the entire income spectrum. The dopamine hit. 00:21:46.009 --> 00:21:48.349 Right. And they have made themselves so deeply 00:21:48.349 --> 00:21:51.150 integrated into our local infrastructure that 00:21:51.150 --> 00:21:53.910 entire municipal zoning battles are being fought 00:21:53.910 --> 00:21:56.569 over their presence in our neighborhoods. It 00:21:56.569 --> 00:21:58.910 is so much more than cheap candy and plastic 00:21:58.910 --> 00:22:01.390 bins. So for you listening right now, the next 00:22:01.390 --> 00:22:03.809 time you walk past a dollar store or a pound 00:22:03.809 --> 00:22:06.430 shop or a hundred yen store, I really hope you 00:22:06.430 --> 00:22:08.710 see it differently. Yeah, look past the illusion. 00:22:08.829 --> 00:22:11.529 I hope you see it not just as a convenient stop 00:22:11.529 --> 00:22:14.970 to grab a cheap greeting card, but as a seventy 00:22:14.970 --> 00:22:18.480 seven billion dollar economic titan. A machine 00:22:18.480 --> 00:22:21.299 built on optical illusions, gray market sourcing, 00:22:21.480 --> 00:22:23.599 and global supply chains. It's all right there 00:22:23.599 --> 00:22:25.680 in front of you. But looking at the entire timeline 00:22:25.680 --> 00:22:28.180 we just laid out does leave me with one final 00:22:28.180 --> 00:22:30.740 lingering thought. We went from the five and 00:22:30.740 --> 00:22:33.720 dime in 1879 to the dollar store in the 90s. 00:22:33.779 --> 00:22:36.400 And now, as we saw with the 2023 egg shortage, 00:22:37.019 --> 00:22:39.180 we see these stores dropping fundamental staple 00:22:39.180 --> 00:22:42.579 items simply because the wholesale price breaks 00:22:42.579 --> 00:22:45.200 their rigid retail model. Yeah, the math just 00:22:45.200 --> 00:22:48.559 breaks. Exactly. It makes you wonder, as global 00:22:48.559 --> 00:22:51.559 inflation marches on, what happens to this retail 00:22:51.559 --> 00:22:54.480 model when a single coin or a single bill can 00:22:54.480 --> 00:22:56.910 no longer buy anything at all? When the deep 00:22:56.910 --> 00:22:59.529 -sea submarine finally cracks, will the true 00:22:59.529 --> 00:23:01.490 fixed -price store eventually become nothing 00:23:01.490 --> 00:23:04.269 more than a relic of the past? That is the multi 00:23:04.269 --> 00:23:06.549 -billion dollar question. The trap door is there. 00:23:06.869 --> 00:23:07.930 You just have to know where to look.