Dollar stores are dominating retail by betting on the death of the American middle class

  • Dollar General and other dollar stores are thriving while department stores like Macy's and Sears close hundreds of locations.
  • Dollar stores' sales grow as more Americans struggle economically, with retailers betting on a "permanent underclass in America."
  • Dollar General's CEO said the American economy "is continuing to create more of our core customer" — households making less than $40,000 a year.

Dollar General and other dollar stores are thriving while department stores struggle to survive — and their success is built on the death of the American middle class.

The Wall Street Journal reported that Dollar General has become one of the most profitable retailers in the US by opening more locations in places across the country that have continued to struggle economically.

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"The economy is continuing to create more of our core customer," Dollar General CEO Todd Vasos told the WSJ.

The company's target shopper comes from a household making $40,000 or less a year.

25 affordable dollar store holiday gifts:

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Affordable dollar store holiday gifts

STUFFED ANIMALS

Some kids can never have enough plush friends, and dollar stores have plenty of stuffed animals. There are miniature stocking-stuffer bears, monkeys, and holiday friends for $1. Some dollar stores also carry full-size options and name brands including My Little Ponies and even Elmo, though they're usually a little pricier. 

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DOLLS AND ACTION FIGURES

There are a surprising number of name-brand toys at the local dollar store. Many are no longer on the shelves of big-box retailers (though it's always worth double-checking to make sure you're really getting a good deal). Finds may include Trolls, Barbie, Monster High, Shopkins, PJ Masks, DC Comics Superheroes, classic soldier figures, and more. If the kid isn't picky, off-brand dolls and action figures are on tap for less. 

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TOY CARS

Got a toy-car lover in your life? Fill their need for speed at the dollar store, where there's often plenty of toy cars on the cheap, including familiar names such as Disney Cars, Matchbox, and Hot Wheels. Larger toy cars, some remote-controlled, are often also available for those willing to spend a little more than a buck. 

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ACTIVE TOYS

Add to the kids' arsenal of ways to burn off energy with toys that will get them moving. Dollar stores carry jump ropes, foam footballs, paddle ball sets, mini basketball sets, and more. Some also have off-brand, Nerf-like dart blasters, regulation-size game balls, and pool floats, though these bigger toys are usually pricier than a dollar. 

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GLOW STICKS

Glow sticks and anything else that can light up the night with vibrant neon color is a guaranteed stocking-stuffer hit for any kid. There are tubes of bendable, connectable glow bracelets and necklaces at the dollar store for a buck. Some may also carry glow wands, balls, and even glow-in-the-dark fidget spinners

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SOCKS

Everyone needs 'em, so stuff a pair or two in a stocking for cheap. While dollar stores often have big packs of basic white crew socks, they may also carry super-soft non-skid socks perfect for the winter, thermal or boot socks, and even toe socks for the kids. Some stores will carry trendy items such as slipper socks and boot toppers for a few more dollars. 

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CANDLES

There's little need to overpay for candles, particularly those used primarily as décor. Dollar stores feature a range of styles, including rustic-looking miniature mason jar candles, tea lights, pillar candles, large jar candles with long burn times, and even battery-operated LED votives. 

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BOARD GAMES

Board games are always a great option for mass appeal. Some dollar stores even have classics including Sorry, Guess Who, and Connect 4 for a bit more than a dollar. Just-a-buck options include smaller travel games such as classic wooden peg boards and plastic tic-tac-toe sets. 

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CARD GAMES AND FLASH CARDS

Don't forget to put a deck of cards in someone's stocking this year. Traditional decks of playing cards are a dollar-store staple. Frequent finds include classics such as Old Maid and Go Fish or decks with kid-friendly characters including Mickey Mouse or Shopkins. Flashcards with the ABCs or simple math are another option. 

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PUZZLES

Know a puzzle lover? Fill their stash with inexpensive dollar-store options. Grownup-friendly puzzles at just $1 include vibrant travel scenes and landscapes up to 500 pieces. For kids, licensed-character options with fewer pieces include favorites including "Frozen," Paw Patrol, and Star Wars. Some mini puzzles come packaged in small tins, perfect for stockings. 

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ORNAMENTS

Fill a tree with a stash of dollar-store ornaments. Large packs of shatterproof balls in a variety of colors are a staple at most stores for no more than a few bucks. Giftable single ornaments are also available for $1 -- think knit penguins and Santas, glittery reindeer, and plush snowmen. 

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MUGS

Pick up an inexpensive mug and fill it with a bag of a java junkie's preferred coffee for an easy gift. Plain white stoneware mugs found at dollar stores are perfect for decorating and personalizing with a Sharpie. For those who aren't feeling crafty, there are plenty of festive holiday options. 

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CANDY

Dollar stores have plenty of candy for every sweet tooth, and not just off-brand options: Most carry Snickers, Twix, M&Ms, and more. Not particular about wrappers? Look out for discounts on Halloween candy, which can last up to a year without declining in quality. Giftable boxes of assorted chocolates and wrapped Christmas candies are also easy to find. 

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PICTURE FRAMES

Check out the dollar store for cheaper frame options, especially if plastic or faux wood is okay. Options include 8x10s suitable for gallery walls and smaller tabletop frames perfect for gifting. Metallic finishes look convincingly pricey on a high bookshelf. Slip in a drug-store photo print and create a keepsake to please anyone. 

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HEADPHONES

They won't deliver Bose-quality sound, but dollar-store headphones are a great stocking stuffer for kids who need them for tablets, or as a cheap backup pair for anyone. Earbuds start at just $1 at many stores, while teen-approved over-the-ear styles and kid-friendly headsets with volume control are easy finds for a few more bucks. 

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NAIL POLISH

Stuff her stocking with vibrant shades of nail polish, available for only a buck at most dollar stores. Wet n' Wild and L.A. Colors, name brands that cost more at big-box stores, are among the options at several dollar stores. Some also carry small gift sets that are already ready to stuff in a stocking or put under the tree. 

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KIDS' CRAFT SUPPLIES

Dollar stores are a great shopping source for creative kids. Options include basics such as coloring books, crayons and watercolors, clay, chalk, Play-Doh, stickers, and more. For on-the-go kids, activity kits featuring licensed characters including Care Bears, Transformers, and others are an easy stocking stuffer. 

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GROWN-UP CRAFT SUPPLIES

Dollar stores don't ignore crafty grownups. They often have staples such as floral foam, wreath forms, ribbon, miniature hot glue guns, and organizers. Giftable options may include make-your-own ornament kits, assorted beads for necklaces, and colorful rolls of washi tape with tons of fun patterns.

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PET SUPPLIES AND TREATS

There's no need to leave Fido high and dry this Christmas. Unless the pooch has expensive taste, the dollar store is a great place to grab cheap pet gifts including dog and cat treats, bones and biscuits, squeaker toys, balls, teaser wands, and more. 

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PHONE CASES

As long as nothing with military-grade drop protection is needed, dollar stores often carry phone cases on the cheap. Since fun colors and patterns are a given, this is a particularly good stocking stuffer for a smartphone-loving teen. Just don't expect to find cases compatible with the latest models (sorry, iPhone X owners). 

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TRAVEL TOILETRIES

Frequent fliers will love a small kit packed with travel essentials easily found at most dollar stores. You'll find face wipes, small bottles of shampoo and hand sanitizer, miniature tubes of toothpaste, toothbrush holders, and purse-size packs of tissues. Put them in a cute toiletry bag for a great gift. 

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HATS AND GLOVES

Everyone can use a warm hat or an extra pair of gloves this winter, and most dollar stores carry this welcome stocking stuffer. Expect basic knit options in solid colors or traditional designs. Paying a little more might get you a cozy fleece lining, and there are often character options for kids for a slight premium, too. 

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LIP GLOSS AND LIP BALM

Pamper someone's pout with your dollar-store lip gloss and lip balm finds, perfect for stockings. While there are plenty of off brands, don't be surprised to spot tubes of Carmex, Blistex, Chapstick, Wet'n Wild, Eos, Maybelline, and other familiar names. 

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BATH PRODUCTS

Make a custom gift basket of bath products from a host of dollar-store options. Bubble bath, bath gel, fancy soap, lotion, and even trendy bath bombs are among frequent finds. Don't forget to throw in exfoliating gloves, poofs, washcloths and other accessories to complete your gift. 

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JOURNALS

A great gift for a tween or teen who needs a safe space to vent, colorful journals are often available on dollar stores' shelves. Options range from basic composition books and spiral-bound mini notebooks to hardback journals with elastic bands that keep them closed. For a few more dollars, some stores have kid-approved furry covers, journals with writing prompts or even lockable journals. 

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"We are putting stores today [in areas] that perhaps five years ago were just on the cusp of probably not being our demographic, and it has now turned to being our demographic," Vasos said.

As department stores like Sears and Macy's have struggled to grow sales, dollar stores and other super-budget retailers are dominating.

From 2010 to 2015, dollar store sales grew from $30.4 billion to $45.3 billion in the US. While retailers close thousands of stores across the US, the WSJ reports Dollar General is planning to build "thousands more stores, mostly in small communities that have otherwise shown few signs of the U.S. economic recovery."

Dollar stores' success is based on their ability to provide what lower-income households need when they have no other options. Instead of selling items in bulk that allow for long-term savings, dollar stores sell small quantities of items that customers can afford — even if they end up paying more on a per-ounce or per-item basis in the long run.

15 things to never buy at the dollar store:

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TOYS

The old adage "you get what you pay for" certainly applies to dollar-store toys. While a $1 price tag seems like a low-cost way to give your child a treat or add to the stash for a nephew's birthday, don't bother. Katie Curtis of Logan, Ohio, posted a picture on Facebook of her 3-year-old holding a dollar-store imitation Barbie that was dismembered in less than 10 minutes.

Dollar-store toys are not only poorly made -- they may be safety hazards. Several toys from these chains have been recalled in the past: a toy gun that posed a choking hazard, a remote control tank that could overheat, and a dart gun that caused the deaths of two children. In 2016, Dollar General recalled a toy truck deemed a fire hazard

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ANYTHING WITH A PLUG

While dollar-store extension cords or USB cables may seem like a deal, they could be putting your electronics, as well as your home, at risk. Cords, plugs, and power strips sold at dollar stores are often flimsy and can fall apart easily. All it takes is one loose connection to spark a fire. Dollar stores have recalled extension cords and decorative lights for potential fire hazards, according to the Consumer Product Safety Commission. 

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BATTERIES

If your kids play with lots of battery-operated planes, trains, and other such toys (and inevitably leave them powered on), loading up on packs of generic batteries at the dollar store may seem like a swell idea. The problem, as Wired showed through a series of experiments, is that the batteries are packed with less energy than name brands. They may be adequate for something like a flashlight that is used infrequently; for heavy use, it's dollar-wise over the long haul to save the hassle of constantly replacing power cells by spending more upfront on higher-quality batteries. Moreover, cheap batteries are known to leak, which can damage electronics.

Another way to tell if dollar-store batteries are a good buy: Check the label. If the batteries contain carbon zinc, be sure to pass. This component is inferior to the lithium used by name brands. 

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VITAMINS AND HERBAL SUPPLEMENTS

For something as important as your health, best head to the pharmacy. Consumer Reports has tested dollar-store multivitamins and found that some were substandard, lacking the full amount of nutrients listed on the labels. Although the U.S. Food and Drug Administration requires that labels be accurate, supplements are not subjected to the same rigorous review and approval process as medications. 

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KNIVES

For anything with a sharp blade, going cheap is just asking for trouble. Knives are dangerous by definition, so you want one that is sturdy and well-made to minimize any chance of an accident. A dollar-store utility knife recall is just one example of the hazards posed by cheaply manufactured knives. Never mind that these knives, with their dull, thin blades, won't do much for your culinary aspirations. 

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PET ITEMS

Canned cat and dog food costs about $1 a can at the grocery store, and sometimes less if you find a good sale. The off-brands at the dollar store may be even cheaper, but they don't use the quality ingredients found in the more popular brands. For Fido's sake, skip the pet food at the dollar store. Take a pass on the animal toys, too, which are cheaply made and may pose a serious choking hazard. 

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BEAUTY PRODUCTS

Some personal care items are a steal at the dollar store, but others, such as makeup and hair color, are not worth even the cheap price. Every once in a while you may be able to find name-brand makeup on the shelves for $1, but more often than not the makeup at the dollar store is an unfamiliar brand. When it comes to products used on your face, it isn't worth the risk of an allergic reaction or rash caused by cheap ingredients. As for hair color, you risk long-term damage to your locks with an unknown brand, especially at just $1 a box. 

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SNACKS

As if snacks weren't already unhealthy enough, manufacturers of dollar store munchies skimp on the quality of ingredients to keep costs down. Items such as chips, cookies, and crackers can contain ingredients you've never even heard of, so be sure to check the label before bringing a snack home. For treats such as soda and gum, there's often a better deal on higher-quality products at the grocery store. 

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TOOLS

Tools are meant to be durable. For $1, you aren't getting the highest-quality materials, which means the tools won't last as long. A hammer for $1 will likely give $1 worth of durability. If you have to replace your tools frequently, you aren't saving anything at all. Splurge on a good hammer from the hardware store and never have to worry about replacing it again. 

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WEDDING DECOR

While weddings can be expensive, decor is probably not the best place to skimp. For example, it may be tempting to buy 300 fabric rose petals for $1, but they probably won't give you the look you want. The same goes for the 48-pack of plastic "silverware" -- it's flimsy and will likely cause more trouble than it's worth. Sometimes it's better to skip something altogether rather than spend even a dollar. 

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PAPER PRODUCTS

You get what you pay for. While four rolls of one-ply toilet paper will be low-cost, the quality is cheap -- there's more sheer product for the lower price, but you'll end up using exponentially more toilet paper from a dollar store than by paying a little more for a better product from another store. 

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PLASTIC FOOD CONTAINERS

Recent studies indicate there are harmful chemicals in poor-quality dollar store containers, meaning they may not be safe for food products. For containers to store food in, look elsewhere; using the containers for non-food items doesn't pose the same risks. 

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WINDSHIELD WASHER FLUID

A gallon of off-brand windshield washer fluid can cost just $1, half that as for a name-brand fluid elsewhere. Read the label on washer fluid found at a Dollar Tree, though, and see if it says the solution is not effective in winter weather. The name brands often guarantee protection in weather as low as 28 degrees below zero.

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SODA

Watch the amount of soda you buy at the dollar store. Often a 1-liter of off-brand soda at the dollar store will cost the same as a 2-liter bottle of a name-brand soda at the grocery store. The same is true for most cans and smaller bottles of soda. Consumers claim the quality is subpar as well.

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GUM

While the gum at a dollar store doesn't taste different, and you can often find name brands there, it isn't usually a good deal. The packages of gum are smaller: four-packs, each containing five sticks, for $1, compared with deals at bulk stores such as Sam's Club or Costco, where shoppers pay far less per stick -- such as Costco charging around $10 for a dozen packs of Orbit, each with 14 Sticks.

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"Essentially what the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America," Garrick Brown, director for retail research at the commercial real estate company Cushman & Wakefield, told Bloomberg.

Brown continued: "It's based on the concept that the jobs went away, and the jobs are never coming back, and that things aren't going to get better in any of these places."

Pew Research Center defines "middle class" in America as households with two-thirds to double the national median income. While that still includes roughly half of American households, it's a shrinking group — from 2000 to 2014, middle-class populations decreased in 203 of the 229 metropolitan areas reviewed in a Pew study.

While the average household income for the wealthiest 20% of Americans grew by about 60% from 1980 to 2015, the rest of America has lagged significantly behind. The mean income of the lowest-earning 20% grew by just 10% in the same time period.

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