Dollar General’s Popshelf expansion shifts into high gear

Discussion
Photo: Dollar General
Dec 06, 2021

Dollar General is planning to accelerate the expansion of Popshelf, its concept targeting suburban women, with a goal of reaching 1,000 locations by 2025.

Introduced last October, Popshelf focuses on home decor, seasonal entertaining and health and beauty, with 95 percent of items priced below $5.

The format uses continual merchandise changes and treasure-hunt items to encourage frequent trips. Depending on the time of year, the mix may include toys, throw pillows, Christmas ornaments, pumpkin-shaped disposable paper plates, balloons, bath bombs and specialty food items such as hot cocoa and cheeses for a charcuterie board, Dollar General chief merchant Emily Taylor, told CNBC.

Slightly larger than a traditional Dollar General at 9,000 square feet, Popshelf targets younger and more suburban women versus Dollar General’s rural and slightly older customer. The household income target ranges from $50,000 to $125,000 compared to Dollar General’s reach into household’s $40,000 or less. The color scheme is a more adventurous pink and white versus Dollar General’s green and yellow.

Popshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience, delivered through continually refreshed merchandise, a unique in-store experience and exceptional value,” said Jeff Owen, COO on the retailer’s third-quarter conference call.

The concept builds on the non-consumables initiative at its namesake chain that is driving “meaningful improvement” in overall gross margins, Mr. Owen said. Popshelf’s annualized sales volumes for current locations is projected to be between $1.7 million and $2 million per store at average gross margins of more than 40 percent.

Popshelf has 30 locations with plans for 50 by year end, 150 at the close of 2022 and the ultimate potential of 3,000 locations. The planned expansion is “incremental” to the flagship Dollar General chain, which has 18,000 locations and the potential for 13,000 more.

The plans to roll out the Popshelf locations came a week after Dollar Tree said it had begun shifting to a $1.25 price point for most items. Dollar Tree attributed the move to inflation andnot a reaction to short-term or transitory market conditions”.

Beyond adding non-consumables, Dollar General has been bolstering margins by expanding private labels, investing in healthcare products, and insourcing fresh and frozen food distribution.

DISCUSSION QUESTIONS: What do you think of the overall appeal of Popshelf and the timing of the ramped-up launch? Which competitors will likely feel the most pressure from Popshelf in the years ahead? What will be key to its success?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Dollar General has been far more disruptive and influential than it’s been given credit for."
"Great traffic driver! Great basket builder! I love it. It’s Target for lower-income or budget-conscious shoppers."
"Great move by Dollar General. This is a multi-shot target against the likes of Target, Bed Bath & Beyond and Walmart."

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14 Comments on "Dollar General’s Popshelf expansion shifts into high gear"


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Carol Spieckerman
BrainTrust

Dollar General has been far more disruptive and influential than it’s been given credit for. Dollar General deserves even more credit for diversifying into new formats even as it continues to innovate in its small-format general stores. Creating a medium-sized format focused on high-margin general merchandise is a bold and ingenious idea. It speaks to Dollar General’s agility and willingness to forge ahead into new territory. Popshelf will pose a threat to hard-to-navigate big box stores and small format competitors alike.

Brandon Rael
BrainTrust

The Dollar Store segment has been on fire and has scaled significantly over the past few years. This growth has been fueled by our economic disruptions and the rise of value-conscious customers. Dollar General has been at the forefront of this growth, with their significant store expansion strategies and now their diversification approach with the emergence of the Popshelf brand.

The compelling combination of higher quality items, private labels, treasure hunt, and a better in-store experience may make Popshelf a brand to be reckoned with. By targeting suburban women, Dollar General’s Popshelf will compete in the space dominated by Target and other middle-class demographic-focused general merchandise brands. By having their unique value proposition and branding, and entering more affluent neighborhoods, Dollar General is poised for significant growth in this space. Each Popshelf store is projected to have annual revenues of 1.7 million and $2 million per store at average gross margins of more than 40 percent.

Neil Saunders
BrainTrust

Dollar General has a fair amount of headroom left for expanding its traditional stores, however in some areas they are saturated and that will increasingly become the case in the years ahead. As such, it makes sense for them to look to a new format and a different audience for future growth. I have only seen one Popshelf and it is a pretty solid proposition that should do well. However it is up against competitors like Five Below and, unlike Dollar General, it doesn’t have the advantage of consumables to drive traffic. That makes it a more challenging concept to execute.

David Spear
BrainTrust

Great move by Dollar General. This is a multi-shot target against the likes of Target, Bed Bath & Beyond and Walmart. Key to success will be unique, varied and high perceived value of rotating merchandise and the analytics that continually inform management what’s hot and not.

Richard Hernandez
BrainTrust

A bright and clean store and a shift in the product type assortment makes this a differentiator in the market. I see everyone from Hallmark stores to home-centric stores being affected by Popshelf.

Raj B. Shroff
BrainTrust

The overall appeal is great. In this space is a hodge podge of retailers like Michael’s, Jo-Ann, Hobby Lobby, T.J.Maxx, etc. but the former are not really value players and with the latter, you never know what you’ll get which is good and bad. Seems that Dollar General has found a white space niche and is smart to continue to fuel it. Sub-200 stores is still really small in the Dollar General context so the expansion pace seems wisely calculated.

As for competitor pressure, it will be hard to tell over the next few years as there will be really small slivers from the aforementioned competitive set. I don’t think it is stealing trips, just stealing basket, but it will depend on the occasions people use Popshelf for.

Lisa Goller
BrainTrust

Popshelf will win with shoppers who want style, quality and affordability from home, health and beauty goods.

The aggressive store expansion plan capitalizes on soaring demand for value as inflation rises. Dollar Tree, Family Dollar and Aldi likely feel the competitive pressure of this move.

The key to Popshelf’s success is keeping costs low while elevating the quality of value-tier goods.

Jeff Sward
BrainTrust

I look forward to seeing a Popshelf store one of these days. I love the concept as it is described. And I have a very difficult time envisioning the execution with 95 percent of the assortment under $5.

Joan Treistman
BrainTrust

Popshelf has an advantage of prospering from the widespread impact of inflation. It offers a way to overcome the limitations of getting less value for more money. Ultimately the merchandise will seal the deal. It feels like Target’s beginnings all over again.

Rich Kizer
BrainTrust

This to me sounds like a mandatory “turn and burn” proposition, especially at 9,000 square feet. If the buyers get it right and the turn at margins of 50 percent can be maintained in a rather tough market. Their next focus should be how to beat the likes of big discounters that have worked to solidify those customers’ top-of-mind awareness in every category they carry. It works.

Richard J. George, Ph.D.
BrainTrust

Dollar General has been the clear leader and innovator in this channel. Its expansion of its flagship stores has been particularly impressive, even during the pandemic. What’s next? Popshelf. The fact that this new brand is significantly different from its Dollar General stores increases its probability of success. It is always a challenge for a value brand to move upscale. It is difficult to talk out of both sides of your mouth.

Popshelf is targeted to a significantly different consumer than Dollar General. Plus, it allows for the expansion of DG platforms in markets where the flagship store has reached saturation. The treasure hunt aspect should boost sales as well. Finally, the proximity of Popshelf stores to Dollar General stores should provide logistics advantages not often enjoyed by new store formats.

I agree with other BrainTrust members regarding potential competitors. However Popshelf’s offering may be significantly unique as to create a new market.

Liz Crawford
BrainTrust

Great traffic driver! Great basket builder! I love it. It’s Target for lower-income or budget-conscious shoppers. Also — it’s high time that this shopper group is given the same seasonal options as other groups. Bravo!

Jeff Hall
BrainTrust

Popshelf is doing a great job of tapping into the “thrill of the hunt” shopping experience, with always-changing merchandise at terrific price points. The store formats are fresh, clean and well-organized, making the in-store experience enjoyable. The positioning of this concept will put pressure on several seasonal and home decor retailers: Home Goods, Michael’s, TJ Maxx, Target, Hobby Lobby, etc., many of whom will be challenged to compete at Popshelf’s price points.

Carlos Arambula
BrainTrust

It’s smart positioning with broad appeal and a potential game changer in consumer purchase behavior of holiday décor. It is also a concept that’s relatively simple to imitate, so I understand the ramped-up launch is needed to protect the brand and establish a wide footprint. Moreover, the footprint, along with proper social and digital marketing will be critical to appeal to mass merchandiser costumers.

wpDiscuz
Braintrust
"Dollar General has been far more disruptive and influential than it’s been given credit for."
"Great traffic driver! Great basket builder! I love it. It’s Target for lower-income or budget-conscious shoppers."
"Great move by Dollar General. This is a multi-shot target against the likes of Target, Bed Bath & Beyond and Walmart."

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