Ah, the majesty of the 99 cents store...
Traditional 99 cents store wares, with weird off-brand condoms.
I love the 99 cents store. I love it like Tom Hanks in Big likes FAO Schwarz (RIP). I love to wander the aisles, browsing the perfect merchandise, marveling at the deals. But I live in New York City, where dollar stores bloom on every corner. For me, picking up wrapping paper, lightbulbs, or a new broom is easy. For non–city dwelling people, it means driving, parking, schlepping.
So it seems like dollar-store shopping online would make sense, right? Well, sort of. Thus far, dollar stores haven't really worked as ecommerce, for a bunch of reasons, most notably the fact that costs are hard to balance – credit card processing, warehousing, and shipping costs are all going to gobble up the tiny profits on cheapie items. (Dollar Tree does have an ecommerce site, but a representative for the company told BuzzFeed that while the site is profitable, it accounts for a very small part of their business).
A new startup, Hollar.com, is trying to be the first to dollar store succeed exclusively online. And so far, it seems to be working – the company claims that after launching 6 months ago, it is fully profitable, with more than $1 million in sales and $17.5 million in venture capital, raised over two rounds since last summer.
Hollar.com has a few ways of getting around the problems that have plagued other online dollar stores. It enforces a $10 order minimum in order to avoid losing money shipping a $1 item. It doesn’t carry and heavy or oversized items, which are expensive to ship (no full size bottles of laundry detergent, for example), nor does it sell perishables.
Glow Pets, the most popular item on Hollar (the unicorn in particular).
It's also judiciously stocked. “We buy smart,” explains David Yeom, one of the founders of Hollar. One of his co-founders came from Dollar Tree and had relationships with suppliers who could provide good deals on desirable products like Revlon nail polish for $2 a pop (normally around $6 at a drugstore, but probably overstock colors from last season). Despite the low prices, there’s still a profit to be made. “It’s amazing how healthy the margins are in this business.” That $2 nail polish has a 60% profit margin – Hollar's average customer buys around $30, so it adds up.
Hollar doesn't see its competitors as sites like Amazon and Jet, but rather brick and mortar stores like TJ Maxx or Ross, which actually have a really significant business selling cheap toys and home goods, not just clothing. These stores thrive on the “un-amazonable” parts of retail – people who go into a store not for the one thing they know need need, but to browse and find stuff they had no idea they wanted. The 2012 IPO filings for dollar chain Five Below boasted that their brick and mortar stores,“create an element of discovery, driving repeat visits and customer engagement while insulating us against e-commerce cannibalization trends.”
I love my local dollar store exactly for this reason – I love browsing the aisles, looking at the weird stuff. NYC dollar stores tend to be heavy on weird and off-brand goods, which is an extra delight. Hollar doesn't truly provide this – you sort of just browse by category, and a lot of the stuff is name-brand (Disney toys, etc...).
Hollar wants to emulate the impulse shopping experience that dollar stores have traditionally provided. Come for a cheap spatula you know you needed; leave with a toy for your nephew’s birthday, makeup brushes, or a beach bag. So far, their biggest selling item by far is a plush lightup toy called a “Glow Pet”. It sells for $2 on Hollar, or around $10 on sale at Walmart.com.
If one of the big hurdles for online dollar stores is being able to recreate the experience of browsing the aisles and finding some weird shit you never knew you wanted but at 2 bucks is worth a risk, perhaps Hollar hasn’t figured out exactly how to crack that – perhaps it’s that the customer base is finally tech-savvy enough to be willing to try it online. Yeom describes Hollar's target customer as a millennial mom in a flyover state who is looking for a bargain and is used to shopping online. 80% of their customers are on mobile, split between their app and the mobile site.
I asked Yeom how a company founded by five men was going to understand a female customer. “We all are married, we all have kids,” he said. “And we listen to our wives."
from BuzzFeed - Tech https://www.buzzfeed.com/katienotopoulos/why-arent-there-online-dollar-stores?utm_term=4ldqpia
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