Title says it all basically. I understand that inflation is at around 7% give or take. But things that used to cost $1 is now at Dollar Tree / Dollar General / Etc for $1.25 meaning their profit margins are even higher now than they were before inflation, no?
I know dollar stores are actually a rip-off and you get less product for your dollar but everyone is meming about “The $1.25 Store” and I’m super curious how this works.
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There are multiple explanations for this, the first and most obvious one obviously being that there is no law on jacking up prices for anything just because inflation happened, they didn’t have to add 7% just because that happened to be the inflation of a selection of goods and services that make up the anchor for calculating inflation.
There can be some goods that have their prices increased by nothing, some that have their prices decreased and some that have much higher increases than 7%. It’s fair to assume that the dollar store doesn’t happen to be made up entirely of a selection of items that have an average of 7% price increase.
Lastly the dollar stores do not adjust their goods and prices every year as to sell you exactly the same value that nets them exactly the same profits. They might start up with a margin of (no real numbers, just making some up) 30%, then after one year its 28%, after another year there was inflation and the resources in particular became more expensive, making it 20% margin now. After some time, the prices will be increased to reset the margins. It could be that after a couple of years this is just an opportunity to perform a price hike that was long overdue.
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