The mad dash to the dollar shop

Analysts say these ultradiscounters have concocted a successful formula to pull customers such as Sarah McManus away from standard discounters: Build smaller stores that are easier to navigate, with nearby parking so shoppers can get in and out quickly. Keep overhead costs low by limiting inventory. Spend sparingly on store decoration. And generate free publicity instead of paying for advertising.

One example: I.J. Rosenberg attracted more than 3,000 customers to the grand opening of his second Little Bucks store in suburban Atlanta last month by handing out fliers promising to sell nine televisions, nine Game-Boys, and nine Razor scooters each for 99 cents.

Rosenberg modeled the sales tactics after those of the 99-cent Only Store, a sleek West Coast chain that regularly sells Häagen-Dazs ice cream and $1 bottles of wine.

A sportswriter-turned-stockbroker-turned-entrepreneur, Mr. Rosenberg relishes being an upstart in a business dominated by huge chains. He says his store's size gives him the flexibility to buy small quantities of goods - sometimes just half a truckload - which have been turned away by other retailers.

As a result, he has been able to "blow out" 99-cent golf-club fobs, tennis shoes, and 6-XL T-shirts. Rosenberg once sold 5,000 15-pound watermelons in two days.

"People have a good time at my stores," he says. "They never know what's going to be in there."

Shopping for inexpensive goods - in part to experience the thrill of the hunt - is nothing new in America. In the first decades of the 20th century, five-and-dimes such as Woolworth's and Kresge's sprang up in industrial cities to sell working people, "good goods and plenty of them for fair prices," explains business historian and author Regina Blaszczyk.

These variety stores offered cheap products such as costume jewelry and kitchen gadgets. Factory workers, primarily female, could browse there after work. But after World War II, a confluence of factors - including the decline of industrial towns, suburbanization, and the rise of specialty retailers - led to a slow demise of the five-and-dime. In the 1980s, customers gravitated toward Wal-Mart, CVS, and Rite-Aid to purchase everyday items, Ms. Blaszczyk says.

Woolworth shuttered its last US store in late 1990s - just as dollar stores began expanding beyond their home turf.

Analysts expect dollar stores to continue to grow in the US over the next five years, adding that the Northeast and West are ripe for expansion. In addition, the stores are gaining more clout with manufacturers, including Proctor & Gamble and Hershey. The companies make specially sized shampoos and candy bars, respectively, just for dollar stores.

Dollar stores are also stocking more dairy and produce items, hoping to lure customers to visit two or three times each week. Every day, Little Bucks sells half gallons of milk, hot dogs, and fresh bouquets of flowers for 99 cents.

Yet as in other industries, rapid growth entails risk: Dollar stores may expand more quickly than they can build distribution centers and hire managers, says Ms. Skrovan. And in many respects, dollar stores are countercyclical businesses: When the economy picks up, fewer people will pinch pennies. Many may head back to full-service grocery and drug stores, she says.

And it may be difficult for dollar stores to win over skeptical customers such as Gina Mendez of Sherman Oaks, Calif. She says the 99-cent price tag "turns her off," because it give her the feeling that the product is cheap and poorly made.

But Ms. Mendez has not sworn off dollar stores. "Even though I hate them, I still go there with my friends," she says. "And if I go there I never come out without spending $20."

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