Five Below is a chain of American discount stores that sells items priced at or below $5. The store was founded in 2002 and has since expanded to over 500 locations, with the latest opening in August 2017.
In this article we will look at how does Five Below Make Money?
Five Below has adapted a business model that is different from the traditional retail store. They don’t have a “one size fits all” approach, but instead sell items at prices that are five dollars and below. Since they only sell products at this price point, there are no markups and the stores can be more profitable.
How Does Five Below Make Money?
Five Below is a discount retailer that specializes in selling items for five dollars or less. The company has two main sources of revenue: retail sales and Shopkick rewards point system. Retail sales account for about half of the company’s profits, while the Shopkick program accounts for the other half.
It’s a retailer for teens and preteens that sells products at prices of $5 or less.
Customers can find a wide variety of different items in the store like CD’s, socks, clothes, shoes, books, toys, and household items.
The company was able to start with a low price point because it has few expenses: no retail space and no need for advertising.
Instead of investing in inventory, Five Below stocks only the most popular items on its shelves. Then when an item becomes popular, they purchase more stock from manufacturers to meet demand.
This approach allows them to sell high quantities of their products very quickly while keeping costs down.
The 5 ways Five Below makes money
Five Below is a retail store that sells items for $5 and below. They sell many different types of products, from household items to toys. They have five different ways they make money:
1) They have high turnover of merchandise
2) Low margins
3) Unlike most retailers, their prices are fixed
4) Buyers can’t return or exchange anything
5) They have an exclusive product line
What are the best replacement strategies for off-priced retailers?
Five Below is an off-priced retailer that sells goods for $5 or lower. The company uses two main strategies to stay afloat. First, it relies on a variety of low-cost items that are constantly restocked. Second, the company makes most of its profit on kids’ goods and candy. Five Below’s off-price strategy allows it to keep prices low.
Other Examples of Off-Price Retail Stores Amazon’s Price Parity Policy. Amazon’s Price Parity Policy helps off-priced retailers survive in the face of deflationary pressures. An example of such a policy is the one that keeps books from free shipping at $10 or less. However, this policy can backfire as they risk missing out on high profit margins, which could lead them to lower their prices or make them dependent on sales to make a profit.
Five Below Competition
Many people compare Five Below to dollar stores or 99 cent stores. However, there are some key differences between the two.
First of all, Five Below products are all priced at $5 or less. The store is also known for its innovative products that customers can’t find anywhere else.
Lastly, the company offers more than just items for kids and teens. There are plenty of products that adults would enjoy as well such as smart home technology, beauty supplies, and trendy clothing.
Five Below generally competes with retailers such as Walmart and Target, but also with other discount stores, such as Dollar Tree. Some of the ways that Five Below stands out from its competitors is by having an updated store design, an online presence with social media accounts, customer service over the phone and email, and a loyalty program.
Out of all these points, the employee is most important because they are the ones who provide customer service to everyone that walks in. The company has two main goals: “to provide customers with a quality product at a great price” and “to create long-term value for our shareholders.”
Five Below Brief History
Five Below was created in 2003 by founder Tom Vellios. The company is a chain store that sells well-known brands at discounted prices.
The first store opened its doors in Philadelphia, Pennsylvania, and now there are more than 500 stores nationwide with locations in Canada as well.
The company is known for its quirky marketing, which includes TV commercials. The commercials feature kids dressed as superheroes who go on important missions to find items in Five Below. A look at the history of the Five Below logo reveals that it was designed by Horizon Design Group (HDG).
HDG created a logo that could be easily and instantly recognized by customers. The design firm concentrated on creating a simple but effective graphic mark that would work well when applied to any medium.
A new Five Below logo was unveiled on September 1, 2008. It was created using a brighter color scheme and simpler font. The new Five Below logo is based on a pictograph of the number 5, with four stylized legs that lead to the number 5. The colors used in the logo are representative of the core values of the company: fun, fashion, and friends.
Five Below Funding, Valuation and IPO
According to crunchbase, has raised a total of $211 million across two funding rounds of private equity funding.
Five Below notable investors include Advent International (lead investor), Blue 9 capital and LLR capital.
When Five Below went public in July 19, 2012, its stock price was $17. It raised another $163 million during the IPO and was then valued at $901 million.
Five Below FAQs
How much does it cost to open a 5 Below store?
How much does it cost to open a 5 Below store? Well, the answer is actually quite complicated. In order to find this out you would need to speak with someone from the company itself, as well as doing your own research on it. Typically, the costs associated with opening a 5 Below store can be anywhere from $250,000 – $400,000.
Is 5 below a franchise?
5 Below is a discount store that sells various products for $5 and under. They are not a franchise. Meaning they lease and operate all their stores.