Photo: Dollar General
Is there any limit to how many stores Dollar General can open?
One driving force behind the recent waves of brick-and-mortar store closures has been the need to trim unprofitable locations in an overstored retail landscape. One retailer, however, is going full tilt with a physical retail expansion in 2020, which will continue to make it one of the fastest-growing retailers in the U.S.
Dollar General is planning to open 1,000 stores next year, adding to its existing store footprint of more than 16,000 locations, according to an article on CNN. This comes at a time when the chain has been demonstrating both increased year-over-year sales at many stores and increased quarterly profits.
“From rural areas to metropolitan centers and all communities in between, we proudly help a broad range of customers save time and money on items they use and replenish most often,” Crystal Ghassemi, director of public relations at Dollar General, told RetailWire regarding the expansion. “As such, our focus is on serving customers and the communities we proudly call home.”
While pursuing such a large expansion may be at odds with current conventional wisdom, some of Dollar General’s moves have been right on trend with the way major retailers are addressing the new demands of the retail landscape.
Earlier this year, Dollar General became the first national dollar store chain to begin experimenting with BOPIS services, launching the feature at select locations as part of its DG GO! smartphone app. Even before adding BOPIS, that app represented the dollar store space’s first use of scan-and-go technology.
In 2018, Dollar General began testing DGX, its small store concept. DGX stores are half the size of the chain’s 9,000-square-foot mainline locations, meant to fit in urban environments and appeal to a Millennial audience.Â
As part of its ongoing expansion, Dollar General will be rolling out 20 additional DGX stores by the end of 2020 to add to the existing 10, according to an article on Produce Blue Book. In its mainline stores, the chain will be adding fresh produce to about 250 locations, bringing the total stores with fresh produce on the shelves to 850.
Discussion Questions
DISCUSSION QUESTIONS: Will Dollar General see value from its expanding store base in the coming years? With retail over-storing a perennial problem, what can Dollar General do to prevent itself from ending up in a precarious position?
Poll
BrainTrust
Lisa Goller
B2B Content Strategist
Richard Hernandez
Merchant Director
Since the market for low cost goods is so broad, the conventional wisdom about over-building stores doesn’t apply the same way for Dollar General. Additionally, the relatively small footprint of Dollar General stores makes it easy to fit into secondary and tertiary markets comfortably. Sixteen-thousand stores is an incredibly significant store foot print, but as long as Dollar General management continues to prune the store base – that is, continue the cycle of closing/openings based on store performance — then I have no doubt that they can keep opening locations for some time to come.
I have heard the biggest thorn in the side of dollar stores in general (in the past) was not having enough fresh options (deli, produce, etc.) to support a community — I believe that has changed or is slowly changing to support areas that are in need or need to support WIC/SNAP demand. I think these can be good filler stores if the assortment supports the community and pricing with the reach of the consumer.
Dollar General stores are small and focus on essential purchases. This allows it to penetrate into low-density catchments and communities in a way that many other retailers cannot. Given the vastness of the U.S. hinterland, the company still has huge opportunities for expansion despite its already massive footprint. Given that its main rival Dollar Tree is currently on the back foot, the near term future looks bright for Dollar General.
Before Dollar General pulled the trigger on BOPIS, the only way it could kill with convenience was through physical scale. Now that the starting gun has fired, store saturation makes even more sense. I’m also glad to see the comparatively cautious rollout of DGX alongside its traditional stores. Regardless of short term success, no doubt Dollar General is learning a ton about Millennial shoppers through DGX and building bridges to a new generation of value-oriented shoppers. Going forward, Dollar General will have a lot to offer in terms of instant recognition and convenience for digitally-native brands. Will that be the next power move now that the brick-and-mortar base is linked to digital?
Dollar General has continued to evolve from its treasure hunt beginnings by adding additional items mainly in what would be traditional grocery categories. This has increased trip frequency and basket size and thus total sales. It’s now a competitor not only for other dollar store formats but for traditional grocery and convenience stores.
C-stores have also evolved but their evolution has been from fill-in grocery to snacks, beverages and foodservice. I believe Dollar General will continue to have room to grow. Hopefully it will realize when its stores are approaching saturation and then concentrate on growing the volume of its existing locations.
Yes, Dollar General will profit from investing in expansion and innovation.
Even in a strong economy, consumers across age groups and income levels still seek great value. Rising costs of education, food and healthcare mean more consumers feel pressured to stretch every dollar. Dollar stores even attract affluent shoppers, as nearly a third of spending comes from households with annual earnings of $100,000 or more.
Investing in technology, assortment variety and quality produce will give Dollar General an edge as value shopping soars.
Unlike larger stores, convenience, dollar, QSR, and gas stations have a substantial amount of impulse buying, smaller store influence radius and are usually not destination sites. The smaller format stores will be a welcome addition in many communities and with modern tech like BOPIS and scan and go, will offer true expansion of Dollar General’s commodity merchandise. A good move for a fast growing retailer. The store format effectively reduces opening, hiring, and leasing costs while the company will have an easier time optimizing their store locations over time. Other discount retailers like Dollar Tree, Walmart and TJX with their recent digital launch at Marshall’s also experiment in omnichannel services and this will be a new area of competition that they will need to navigate better to stay ahead.
Earlier this year, BrainTrust panelist Mark Ryski, Founder, HeadCount Corporation suggested that the U.S. has significantly more retail space per capita than any other industrialized country. So yes, we are over-stored in the USA. However, Dollar General has figured out a way not only to introduce formats that fit communities and cater to the specific needs of the area, but they have also evolved their product assortment based on emerging consumer trends. I personally believe there is room in the country for as many as 20-25,000 Dollar General locations. I applaud their expansion, their foresight, and their mission to offer convenience, quality brands and low prices.
I live in rural upstate New York with three versions of dollar stores in the neighborhood. We can’t get a decent grocery chain interested as these stores cherry-pick the basics like detergent and other profitable items for groceries and discounts. I have to believe though that this modern Kresge’s five-and-dime will over-saturate and consumers will once again move on. Until then though, their growth is a deterrent to progress.
Dollar General’s core competency in being nimble and able to experiment will be the key differentiator. With a store footprint of the size it has, it is an impressive scale of innovation. If Dollar General is expanding when the economy is robust, I can only imagine how well it will do when the recession cycle hits.
What’s not to like? Ease of a quick stop, everyday essentials, variety, all at a low price. One thing I might caution them on, Dollar General needs to watch the ingredients in their food products and the chemicals contained in non-food offerings, being ever watchful of human health and potential environmental hazards contained in their vast array of products in the dollar price range.
Dollar General, and dollar stores in general, are still a very hot segment that hasn’t shown any loss of steam. Consumers love the convenience and value and look to dollar stores for certain items that are great values (toiletries, greeting cards, balloons, etc.) and also enjoy the treasure hunt of whatever else they can find as a bargain.
Eventually, there is a saturation point on dollar stores, but it appears like there is still some room to grow. To put it into perspective, using QSR as an example, Subway has about 24,000 U.S. locations and Starbucks and McDonald’s have 15,000 and 14,000 locations, respectively.
Subway is probably getting close to its saturation point, as they closed 1,000 locations this year.
When consumers don’t value bargains dollar stores will suffer, but I don’t see that happening soon.
I am interested in seeing the performance of stores in major metro areas — if DGX is successful, there is a whole to runway of growth for them. I hope they continue to add fresh produce to more stores — the “food desert” concept is a real thing and Dollar General needs to be part of solving that problem.
There seems to be additional appetite for Dollar General’s low cost stores. No matter where else the shopper shops, there always are some items at Dollar General that draw customers due to their low price. DG will not be over-storing for a long time as the Dollar General stores are small and can be placed in many existing locations. There is also a market for the low cost items they carry. DG can watch the sales in each store to recognize when the growth momentum slows.
“Over stored” is a general concept. We may have too many gas stations, steak houses and department stores, but (still) have too FEW charging stations, vegan restaurants and “pre-owned” clothing stores. In short, composition matters.
And dollar stores seem like exactly the kind of thing we may not have enough of, IMHO, and a lot of conventional wisdom notwithstanding, they’re relatively immune to online competition and there seems to be no shortage of people who need to save money (or at least want to). So they’re certainly the type of business that MIGHT have growth potential. When the limit will be reached — or whether it might already be here — I can’t say.
Dollar General has clearly emerged as the value channel leader. From the days of an “ankle biter” to its ongoing innovations in online, BOPIS, and store size, these folks headquartered in Goodlettsville, TN, clearly understand the pulse of its current customer base as well as what is necessary to attract younger shoppers.
Its focus on consumables certainly takes business from traditional food retailers. However, it has become recognized as a real competitor to C-Stores without charging C-Store prices. What’s next? Perhaps a distribution alliance with Amazon, using Dollar General’s vast array of stores representing potential pick up points. No one should underestimate Dollar General.