Cereal bowls. Contadina pasta sauce. Legg's socks. Johnson & Johnson cotton swabs. Ghirardelli chocolate. Aspirin. A flashlight with batteries.
To the average shopper, these things have little in common. But to entrepreneur David Gold, they are all exactly the same--worth just 99 cents.
The son of a Russian peddler, Gold got the idea for his chain of 99 Cents Only Stores in the early 1960s while operating a small liquor stand in downtown Los Angeles' Grand Central Market. When he priced bottles of wine at 99 cents, they sold so quickly--much better than wine priced at $1.01 or even 98 cents--that Gold dreamed of owning an entire store where everything would be 99 cents.
"We didn't laugh in his face--but we were skeptical," said Larry Borenstein, who started working for Gold when he was 12, delivering wine to the flophouse hotels that then dotted Bunker Hill.
"We didn't see how you could sell everything for 99 cents and still make a profit. But he was right then, and he's still right," said Borenstein, now vice president of operations at Gold's company.
The 99 Cents Only chain has 46 brightly lit stores with neatly stacked wall-to-wall merchandise, all within 50 miles of downtown L.A. This week it will open a store in Glendale, and an additional store will open in North Hollywood in June.
Last year the company reported a 43% boost in profit and a 20% increase in sales to $183 million. Its stock price has risen more than 30% since it went public last year on the New York Stock Exchange.
Like the five-and-dimes that were once a staple of Southern California, discounters such as 99 Cents Only Stores are becoming essential bazaars for a whole generation of shoppers.
Part of a growing and profitable industry trend, these value retailers offer everything from food to household goods at rock-bottom prices. Most of the retailers target low-income shoppers for whom every penny counts, the people whom giants like Wal-Mart Stores Inc. have moved away from. Although these discounters don't have the food counters or the feel of the old 1940s dime stores, for many urban dwellers this is the new neighborhood shopping experience.
"This is the new model of the variety store--they're small, neighborhood-oriented and the customers come frequently. They're the kind of customers who often will say hello to the store manager," said Barbara Miller, a retail analyst in New York.
"This could be the return of the old five-and-dime for a whole new generation of people," said William H. Crookston, a professor of entrepreneurship at USC's Marshall School of Business, who was born in Los Angeles 61 years ago. "The place where it was a treat to go with your granddad. These places always have a lot of children, and they have those impulse items."
Besides the 99 Cents Only Stores in Southern California, Dominguez-based Mac Frugal's Bargains Close-Outs Inc. operates 320 retail stores in 18 states, selling wares at as much as a 70% discount under the names Pic 'N' Save and Mac Frugal's. The company, started in 1971, saw its sales increase nearly 20% in February and March over the same period last year.
What's driving these stores? Demographic trends such as immigration, more elderly people on fixed incomes and more people earning $25,000 or less a year. And shoppers who just like good deals.
"Saving money is in," said Neil Watanabe, chief financial officer of Mac Frugal's.
Although some national discounters such as Everything's a Dollar and All for a Dollar have gone out of business or filed for bankruptcy protection in recent years, many others are thriving.
Everything is just $1 at Dollar Tree Stores' 767 outlets, mostly on the East Coast. (None is in California.) Despite the successful growth since the Norfolk, Va.-based chain was started in 1986, CEO Macon Brock said the company still learns from 99 Cents Only.
"David Gold, I have to give him credit for starting this one-price- point concept in recent decades," Brock said. "I admire what they've done."
In 1982, Gold and his wife, Sherry, took a chance on their cherished dream of opening a 99 Cents Only store in Los Angeles after they sold their downtown liquor store. Lines of people were wrapped around the building when the first store opened near Los Angeles International Airport on Aug. 13, a Friday.
Now they are in the midst of an expansion, with plans to open seven stores in the Los Angeles area this year. There are also plans to expand to San Diego, Arizona, Las Vegas and possibly New York through acquisitions.
"They remind me of a young Wal-Mart," said Bob Buchanan, a retail analyst at NatWest Securities in New York, a firm that took 99 Cents Only public last year. "Basically, they are the originator of the concept, and they are the best at it."