Guy does $2 shops really makes profit? Where do they get products from? Whats their margin? Whats are their expenses? What are labour costs? Does not need exact figure, also please specify any assumptions. Thanks a lot in advance.
$2 Shops Profits
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Candy is the official currency for children. $3 can probably buy him 5-6 bags of lollies from his school canteen (assuming it's still ~50c a bag from the 90s). 5-6 bags of candy means you're rich!
I negotiated $3 an hour to sweep and mop the house and 2 hours of uninterrupted minecraft
This brings to mind another type of shop the middle eastern rug shop… how does this work never seen a customer in one always on sale or permanent closing down sale?
Magic carpets magically make gold.
I guess most of them are run by families which takes the labor cost down. The rent is huge and may eliminate all the profit. If they are not profitable then they have a different sort of business, less obvious.
I would assume that they may be used:
As mentioned earlier to launder money.
By ethnic communities to dodge oz migration laws using the shops as subjects of business immigration. They don't even need to chance the staff, only nominated owners.
I suspect that the majority of those cornershop non-franchised $2 style shops operate on a very traditional business model. Given a lot of the items are typically non-perishable (e.g. toys, books, tennis balls, etc), they can afford to go for the simple approach of as long as I buy below $x, I will make a profit of $2-$x. There are no marketing overheads typically as it's all in the name, store fittings are usually basic at best (I doubt anyone would buy brand new?) and as others have mentioned much of the labour is family and friends - i.e. cash in hand, minimal taxes, etc. Apart from the Daiso's/Reject Shops, I don't think they have sophisticated inventory management to identify what sells well/needs replenishment (as opposed to just first hand 'experience') and again it keeps costs down.
The business model is also probably not too different from say a COTD approach of buying items from businesses in distress.
I have some experience in similar business models. The average markup is 100% (a larger, higher volume store has the opportunity to increase these margins) and as many people have commented most items are not actually $2. These shops can be very profitable owing to low staff requirements and relative ease of sourcing goods. This being said I would say the majority 'get by' in that they provide an income for a working owner or couple but don't really generate excess profits. Most independent discount stores even with a few stores do not source directly from China but instead buy from wholesalers in Australia. Most of these wholesalers stock a wide variety with pretty much everything that a discount store sells.
As mentioned already by previous users a huge success factor is location as these shops primarily rely on passing trade, from what I've seen the best locations are those with an anchor tenant like Coles or Woolworths but no Kmart, Big W, Target as there is overlap in many products.
Happy to help out OP by private message if you need some more info.
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the difference is your nephew isn't an adult, and thinks a weekly wage is $3