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Behind Dollar General's Strategy to Dominate Rural America | The Economics Of | WSJ - YouTube
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- Dollar General's business model.
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It's a retailer that
can make a lot of money
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selling very cheap goods to a relatively
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small number of people.
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- [Narrator] If you've ever
shopped at a Dollar General,
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you might've found the store
on a remote road like this one.
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- [Sharon] It has every appearance
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of being in the middle of nowhere,
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but this is a meticulously planned,
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very well thought through strategy.
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- [Narrator] A strategy that's been key
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to Dollar General's
success in rural America.
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The company is bucking
current retail trends
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by expanding rapidly and opening stores
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away from population centers.
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- Dollar Generals go
where Walmart's aren't.
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- [Narrator] But it's not
just the strategic locations
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far away from big box stores.
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Dollar General employs a number of tactics
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to keep operating costs down.
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Including leasing stores,
paying employees low wages,
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and selling limited products.
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And yes, that includes stuff
that isn't really a dollar.
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- Dollar General is almost
something unto itself.
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It kind of takes pieces
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from a lot of different retailing models.
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- [Narrator] This is the
economics of Dollar General.
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After more than 30 consecutive
years of sales growth,
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Dollar General has become
one of the most profitable
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and fastest growing retailers in the US.
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Last year, the company brought in
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more than $30 billion in sales.
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So how has a store that sells
products at rock bottom prices
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manage such extreme growth?
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- They add about two and
a half stores every day
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in the United States.
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Just for scope, there's
more than four times
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as many Dollar Generals
as there are Walmarts.
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There's more Dollar Generals
than there are McDonald's
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in the United States.
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- [Narrator] There are currently
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more than $17,000 Dollar
Generals in the US.
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But if you don't live in rural America,
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you might not have ever even stepped foot
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inside the store.
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- [Sharon] Where would you
typically find a Dollar General?
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You'd think of a two lane road.
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Think of, you know, places
where the houses are far apart,
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farmlands, kind of lower
income communities.
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You might find them by a
post office, or a church,
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or at an important intersection.
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- [Narrator] This is often
a deliberate decision.
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The company has formulas
for identifying locations
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to open stores.
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Often, the Dollar General
will be down the road
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miles away from the
nearest town and Walmart.
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Areas with limited shopping options.
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Three quarters of Dollar General stores
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serve communities of 20,000 people or less
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according to the company.
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- It looks for need, first and foremost.
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So it's gonna look for a place
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that we might call a food
desert, where there are not,
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there's not a grocery store,
there's not a big box store.
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It's kind of target
demographic is households
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with people making $40,000 or less.
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And it looks for a place
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where it can get inexpensive real estate.
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- [Narrator] To keep costs down,
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Dollar General tends to
lease their properties
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rather than buy them.
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And inside the stores, it
has a limited selection
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of products that it buys in bulk,
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which gives the company more
buying power with suppliers.
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Most Dollar General stores
don't offer fresh produce.
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And compared to grocery stores,
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have less perishable items.
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Which have a shorter shelf life
and bring in lower margins.
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- [Sharon] You walk into a Dollar General,
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you're gonna see metal shelves.
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It's gonna be quite bare bones.
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Think linoleum, think, you know,
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think bright lighting.
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You won't see a lot of
people working there.
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- [Narrator] By paying
low wages to a minimal,
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often part-time staff, the
company keeps labor costs low.
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The median annual income for employees
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is just over $16,000
according to Dollar General.
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Dollar General says they employ
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more than 157,000 individuals,
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and that they offer employees
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competitive wages and benefits.
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- These stores are
staffed at minimum levels,
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so there aren't many employees.
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They pay closer to a gas station attendant
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than even a Walmart employee.
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So it's people that much
like their customer base,
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people who live in an
area where there aren't
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a ton of other options.
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- [Narrator] Despite the name,
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not everything costs a dollar.
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But prices are extremely cheap
and often significantly lower
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than grocery and drug stores.
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Critics say Dollar General
strategies harm local communities
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by not providing healthy food options
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and potentially hurting the
local small business economy.
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Dollar General says that
they are not a grocery store
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and that they are serving customers
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that would otherwise not have access
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to an affordable retail option.
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Ultimately, the low
prices and the convenience
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for rural customers is what
keeps people coming back.
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Some shoppers have even found
items for under a dollar.
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- [Shopper] Penny shopping
at Dollar General.
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Let's go.
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The first store I found
Propel water for 1 cent.
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Now let's just use the Dollar General app,
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scan and verify it's a penny
before heading to the register.
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- [Narrator] Dollar General is
on pace to continue growing.
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The company grew 16% during the pandemic.
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A time where other retailers
saw growth in e-commerce,
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not in-person shopping.
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- Dollar General plans to open
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about a thousand stores this year,
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and when you have a business model
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that involves small footprint stores
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without a lot of embellishments
or bells and whistles,
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a company can do that quickly
and they can do it cheaply.
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- [Narrator] Dollar General
is also branching out
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and going in new directions.
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It's been experimenting with stocking
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more fresh and refrigerated food,
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and moving towards urban centers.
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It plans to expand Pop Shelf.
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A new chain aimed at higher
income, suburban customers.
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- Pop Shelf, in addition to being located
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in different places,
it'll aim to sell things
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that are more, think of more fun.
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So not as much staples that
you need to get by day to day,
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but things like
decorations, party supplies,
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a little bit more fun than necessary.
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- [Narrator] Dollar General
says the new expansion
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isn't necessarily a shift
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from their overall growth strategy.
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They say they can serve
a diverse customer base
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with stores in urban, rural,
and suburban locations.
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Yet, even as Dollar General
expands its offerings
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and target demographics,
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the company expects
that its core customers
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will continue to be
shoppers in small towns
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without other options.
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(fun quirky music)
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