Will Dollar General win over higher-income consumers with its new store concept?

Discussion
Photo: Dollar General
Oct 09, 2020
George Anderson

Dollar General is launching a new retail concept — popshelf — designed to appeal to consumers with more disposable income than those who shop in its namesake stores.

The retailer will launch its first two popshelf locations in the Nashville market this fall, with plans to open 30 in suburbs around major cities by the end of its next fiscal year. Popshelf stores will feature cleaning products, health and beauty supplies, home decor, party goods, seasonal merchandise and more.

Dollar General promises that the new stores will provide customers with a “stress-free and guilt-free shopping experience as they find the items they want while being delighted by unique special products.” Ninety-five percent of items sold in the 9,000-square-foot stores will be priced at $5 or less.

Emily Taylor, chief merchandising officer at Dollar General, said the popshelf concept was built on insights the retailer gained from a successful non-consumables initiative at its namesake chain. The result she said, is that popshelf will offer its customers “a differentiated retail concept that seeks to bring joy to their shopping experiences.”

The retailer said the target demographic for popshelf is women in households earning between $50,000 and $125,000 annually. The core customer group in Dollar General stores are women from homes with annual incomes of $40,000.

“We are excited to introduce popshelf from a position of strength, further highlighting our innovative spirit and building on our proven track record of store format innovation,” said Dollar General CEO Todd Vasos in a statement. “We have leveraged robust consumer insights to create a unique store that we believe will resonate with new customers, while providing Dollar General with even more opportunities for growth in the years ahead.”

Dollar General reported an 18.8 percent increase in same-store sales in the second quarter as management increased focus on not only non-consumables but also its DG Fresh and DG Pickup initiatives. The retailer, which has seen its store count grow to nearly 17,000 locations, posted an 80.5 percent increase in operating profit, reaching $1 billion in the latest quarter.

DISCUSSION QUESTIONS: Do you expect to see Dollar General grow the new popshelf store concept into a successful national chain? What aspects of popshelf should DG focus on to make it most appealing to higher-income shoppers?

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"popshelf will successfully attract urban, affluent consumers who seek a single source of staples. "

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24 Comments on "Will Dollar General win over higher-income consumers with its new store concept?"


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Mark Ryski
BrainTrust

Given the current levels of unemployment and general economic uncertainty, consumers will be looking for lower cost alternatives, and this new concept will be an ideal fit for many. Dollar General and the low-cost category collectively have done very well during the pandemic, and I think this is a smart strategic move on the part of Dollar General to expand their base to more upscale customers. From real estate to inventory, it will be a buyer’s market for any strong retailer, and Dollar General is one of them.

Richard Hernandez
BrainTrust

I like it – it has the same feel (colorful, joyful) as the Five Below stores. I would watch the demographic areas these stores open in – if they keep within the parameters that they have defined, they will do well and I would like to see what a head-to-head against Five Below looks like.

David Naumann
BrainTrust

Dollar General’s new popshelf concept is very similar to Five Below which is a very successful brand, which shows that there is big demand for this price point and the treasure hunt shopping experience. There are already a lot of higher-income consumers that shop at dollar stores and they are not ashamed to admit it. This should be a successful concept for Dollar General and I suspect some other chains may follow their lead.

Brett Busconi
Guest

I think that Dollar General has a great position in the lane they currently occupy and that it makes sense to keep their focus there. They will see increasing numbers due to the economic crunch of the time we are in right now – but I do not see them playing to the upper tier of the Five Below shoppers. Given how strong they are the time to make reaches might be now, so I applaud their efforts. Ultimately, I do not see this being a success for them.

Suresh Chaganti
BrainTrust

Don’t higher income folks love good deals?

Jeff Sward
BrainTrust

I’m guessing that the success of this venture will be driven as much by location selection as by the concept itself. What retailer are they going to be stealing market share from? Sounds like a nicely upgraded and well curated version of the seasonal aisle of my grocery store. But will it compel a separate trip?

Neil Saunders
BrainTrust
This is a sensible move for Dollar General which needs to explore more growth vectors as the opportunity to open traditional stores starts to shrink. The existing economies of scale at Dollar General will allow the new banner to charge low prices and quickly turn a profit in a way that a completely new entrant to this space would not be able to do. I also think developing a new chain rather than just trying to expand what Dollar General does is sensible. Dollar General is very focused on value and convenience and anything that dilutes that will be unhelpful to the brand’s positioning. All that said, the biggest challenge will be driving regular footfall to the stores. Dollar General stores do not have this issue as they are mainly focused around food which is purchased regularly and they are located in rural areas where there is a dearth of competition. By contrast, much of what the new popshelf stores will sell is discretionary. They will also be operating in a part of the market… Read more »
Jeff Weidauer
BrainTrust

This is an interesting idea; Dollar General already has a strong higher-income base shopping its current stores. It needs to be careful and learn from Walmart’s attempt to appeal outside its core demographic and not try to be something it’s not.

Ian Percy
BrainTrust

Solid advice Jeff, though going from $1 to $5 isn’t exactly jumping lanes. I agree, it really is an interesting idea.

storewanderer
Guest
15 days 16 hours ago

Dollar General is not a $1 operator. Most items are below $10 in their stores, yes. But some items are over $10.

Stephen Rector
BrainTrust

This is a great time for DG to test and learn as much of the rest of retail is reeling. Lots of real estate options for DG to optimize at a discount if this test succeeds.

Gene Detroyer
BrainTrust

Interesting descriptions for a $5 and under place. “…’delighted’ by unique special products.” “…bring ‘joy’ to their shopping experiences.”

Ian Percy
BrainTrust

Dollar stores have become fun destination shopping for my family. There are none nearby so the trip is a big deal. We don’t go there for anything specific, we go to see what there is to get. I hope that doesn’t minimize my high standing on RetailWire! 🙂 Going to a luxury $5 version will be even more fun – I hope they come to Scottsdale soon! Frankly, I’d like to see them side by side. I’d dress up to go to the $5 side!

storewanderer
Guest
15 days 16 hours ago

There is a Dollar General in Mesa at 330 East Brown Road with extensive photos on Google which are pretty consistent average store conditions for this chain. (I’ve seen better, and also seen MUCH worse.) You will see they have numerous items there; I would venture less than 10% of SKUs are under $1 in price.

Funny story: the first one of these format of stores I ever saw was a Family Dollar out in Buckeye. It must have been 15 years ago by now.

Cynthia Holcomb
BrainTrust

DG’s popshelf looks fun to shop and browse. Transitioning to a “fashion” play is smart, as fashion is a value attributed to selling higher price point products. Fashion will be an important part of the differentiation in terms of why popshelf is a viable stand-alone complement to the DG dollar stores. The video in the article displays a concept store of well-organized Target-like merchandising of novelty products with a fashion vibe designed to inspire the desire to buy on behalf of the newly intended popshelf customer. This positions popshelf as a bargain fashion product destination for all. Sort of like Tuesday Morning meets T.J.Maxx meets Target only cheaper.

Lisa Goller
BrainTrust

Yes, popshelf will successfully attract urban, affluent consumers who seek a single source of staples. Dollar stores’ affordability and diverse assortments already appeal to wealthier households. Since the 2008 recession, consumers across the socioeconomic spectrum have made value shopping a regular part of their shopping habits. Value shopping even endured 2019’s economic boom.

popshelf’s focus on categories like cleaning products and health supplies makes sense during a pandemic. As we face potential new lockdowns, the categories of home decor, party goods and seasonal merchandise make good strategic sense as we learn to celebrate all our annual holidays at home.

Over the past two decades, dollar stores decimated party goods suppliers. Consumers don’t want to pay $10 for a giant licensed gift bag ahead of the holidays when they can get a similar item at dollar stores at half that price.

Overall, popshelf’s assortment reflects the categories in which consumers seek both value and quality.

Rich Kizer
BrainTrust

Grow it? They will explode it. This is a brilliant retailer that has opened up a huge number of stores this year alone! They are a formidable competitor and know very well how to seize new opportunities and create new formats. And now this new concept store rolls out. A store which will be a store every customer who is mindful of a good deal and convenience will relate with and support. Brilliant.

Gary Sankary
BrainTrust

Interesting concept, I think it’s going to be a hit. The value proposition that Dollar General offers will resonate regardless of income. Affluent shoppers still like to believe they’re finding deals. Adding the convenience of a smaller format neighborhood store and targeted assortment to the brand, I think consumer will respond.

Roy White
BrainTrust

Dollar General has been quite successful by making sure that they are exactly who they are: providing reasonably priced merchandise to people who have to stretch a paycheck in accessible locations where no one else goes. This format has given DG gross margins in the 30 percent range, net-to-sales ratio of around 6-9 percent, phenomenal growth rate in sales and the ability to afford an amazing store expansion pace. While the popshelf format does emphasize private label, the merchandising excitement projected by this interesting experiment, as well as the higher income bracket that is the target audience, moves away from the highly effective, very successful original vision that looks to be perfect for the post-COVID-19 world. popshelf shifts DG away from who it really is and may not prove to be a winning strategy.

Shep Hyken
BrainTrust

One of the keys to making the popshelf store concept successful will be location. I’ve seen Dollar General and similar stores positioned in affluent areas. The right merchandise and experience makes those stores successful. Same for the popshelf concept.

Brandon Rael
BrainTrust

Every brand needs a refresh and for Dollar General, the Popshelf concept may just give the retail giant the entryway into the urban cosmopolitan affluent neighborhoods. While the in-store experience looks to be on par with the latest trends, of upscale assortments, widened aisled, colorful floor displays, and a focus on health and beauty, Dollar General will run into plenty of competition in areas such as NYC.

The goal of every pharmacy business, including Rite Aid, CVS, Walgreens is to become the one-stop-shop for all health, beauty, home, and cleaning needs. These brands are undergoing their own in-store and digital transformations, so the customer already has a choice in these markets.

It will be interesting to see what strategies Dollar General undertakes to make Popshelf stand out and be an authentic store.

Rachelle King
BrainTrust

Truth is, more affluent shoppers have already found Dollar General and have been treating their treasure-hunt stores like a diamond in the rough for some time now. Popshelf means these affluent customers are just getting a nicer place to shop with a few more select items at very affordable prices. Sounds like a win-win for everyone.

Craig Sundstrom
Guest

For years we’ve been told that our stereotype of the dollar store clientele is wrong — or at least oversimplified — in that even wealthier strata shopped there, and now the operator itself seems to suggest we were right the first time. Oh my….

This is an old problem: years ago 5 and 10 cent stores, the predecessors to dollar stores, found themselves constrained by their rigid price policies. First they simply expanded the exiting format, “5, 10 AND 25 cent” but ultimately, many of them established separate divisions (Woolworths had Woolco, Kresge begat K-Mart, etc). This seems to be small first step in history repeating itself.

Will it work? I suppose any well-planned offering has as good a chance as another but right now, all I see offered are a bunch of marketing tropes. I’ll defer further judgment.

storewanderer
Guest
15 days 16 hours ago
My first instinct is to say this will not work. But maybe it will. It looks like a copy of Five Below with less clutter and more SKUs. Add to it the buying power of Dollar General and you may have a winner. They can offer much of the same merchandise through these stores just presenting it differently and potentially reach a different demographic than Dollar General currently reaches. But this store seems to have fewer SKUs than the standard Dollar General and less essential type merchandise than the standard Dollar General. I wonder if a better approach would be to clean up the Dollar General format a little bit and put nicer Dollar General Stores into these types of locations with the full Dollar General product mix. So going back to this format, it looks like it will generate less revenue than the typical Dollar General (since it only has $5 and lower price point product, and fewer product SKUs). It will take more overhead to operate since it promises no clutter and appears… Read more »
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Braintrust
"popshelf will successfully attract urban, affluent consumers who seek a single source of staples. "

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