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  • - Dollar General's business model.

  • It's a retailer that can make a lot of money

  • selling very cheap goods to a relatively

  • small number of people.

  • - [Narrator] If you've ever shopped at a Dollar General,

  • you might've found the store on a remote road like this one.

  • - [Sharon] It has every appearance

  • of being in the middle of nowhere,

  • but this is a meticulously planned,

  • very well thought through strategy.

  • - [Narrator] A strategy that's been key

  • to Dollar General's success in rural America.

  • The company is bucking current retail trends

  • by expanding rapidly and opening stores

  • away from population centers.

  • - Dollar Generals go where Walmart's aren't.

  • - [Narrator] But it's not just the strategic locations

  • far away from big box stores.

  • Dollar General employs a number of tactics

  • to keep operating costs down.

  • Including leasing stores, paying employees low wages,

  • and selling limited products.

  • And yes, that includes stuff that isn't really a dollar.

  • - Dollar General is almost something unto itself.

  • It kind of takes pieces

  • from a lot of different retailing models.

  • - [Narrator] This is the economics of Dollar General.

  • After more than 30 consecutive years of sales growth,

  • Dollar General has become one of the most profitable

  • and fastest growing retailers in the US.

  • Last year, the company brought in

  • more than $30 billion in sales.

  • So how has a store that sells products at rock bottom prices

  • manage such extreme growth?

  • - They add about two and a half stores every day

  • in the United States.

  • Just for scope, there's more than four times

  • as many Dollar Generals as there are Walmarts.

  • There's more Dollar Generals than there are McDonald's

  • in the United States.

  • - [Narrator] There are currently

  • more than $17,000 Dollar Generals in the US.

  • But if you don't live in rural America,

  • you might not have ever even stepped foot

  • inside the store.

  • - [Sharon] Where would you typically find a Dollar General?

  • You'd think of a two lane road.

  • Think of, you know, places where the houses are far apart,

  • farmlands, kind of lower income communities.

  • You might find them by a post office, or a church,

  • or at an important intersection.

  • - [Narrator] This is often a deliberate decision.

  • The company has formulas for identifying locations

  • to open stores.

  • Often, the Dollar General will be down the road

  • miles away from the nearest town and Walmart.

  • Areas with limited shopping options.

  • Three quarters of Dollar General stores

  • serve communities of 20,000 people or less

  • according to the company.

  • - It looks for need, first and foremost.

  • So it's gonna look for a place

  • that we might call a food desert, where there are not,

  • there's not a grocery store, there's not a big box store.

  • It's kind of target demographic is households

  • with people making $40,000 or less.

  • And it looks for a place

  • where it can get inexpensive real estate.

  • - [Narrator] To keep costs down,

  • Dollar General tends to lease their properties

  • rather than buy them.

  • And inside the stores, it has a limited selection

  • of products that it buys in bulk,

  • which gives the company more buying power with suppliers.

  • Most Dollar General stores don't offer fresh produce.

  • And compared to grocery stores,

  • have less perishable items.

  • Which have a shorter shelf life and bring in lower margins.

  • - [Sharon] You walk into a Dollar General,

  • you're gonna see metal shelves.

  • It's gonna be quite bare bones.

  • Think linoleum, think, you know,

  • think bright lighting.

  • You won't see a lot of people working there.

  • - [Narrator] By paying low wages to a minimal,

  • often part-time staff, the company keeps labor costs low.

  • The median annual income for employees

  • is just over $16,000 according to Dollar General.

  • Dollar General says they employ

  • more than 157,000 individuals,

  • and that they offer employees

  • competitive wages and benefits.

  • - These stores are staffed at minimum levels,

  • so there aren't many employees.

  • They pay closer to a gas station attendant

  • than even a Walmart employee.

  • So it's people that much like their customer base,

  • people who live in an area where there aren't

  • a ton of other options.

  • - [Narrator] Despite the name,

  • not everything costs a dollar.

  • But prices are extremely cheap and often significantly lower

  • than grocery and drug stores.

  • Critics say Dollar General strategies harm local communities

  • by not providing healthy food options

  • and potentially hurting the local small business economy.

  • Dollar General says that they are not a grocery store

  • and that they are serving customers

  • that would otherwise not have access

  • to an affordable retail option.

  • Ultimately, the low prices and the convenience

  • for rural customers is what keeps people coming back.

  • Some shoppers have even found items for under a dollar.

  • - [Shopper] Penny shopping at Dollar General.

  • Let's go.

  • The first store I found Propel water for 1 cent.

  • Now let's just use the Dollar General app,

  • scan and verify it's a penny before heading to the register.

  • - [Narrator] Dollar General is on pace to continue growing.

  • The company grew 16% during the pandemic.

  • A time where other retailers saw growth in e-commerce,

  • not in-person shopping.

  • - Dollar General plans to open

  • about a thousand stores this year,

  • and when you have a business model

  • that involves small footprint stores

  • without a lot of embellishments or bells and whistles,

  • a company can do that quickly and they can do it cheaply.

  • - [Narrator] Dollar General is also branching out

  • and going in new directions.

  • It's been experimenting with stocking

  • more fresh and refrigerated food,

  • and moving towards urban centers.

  • It plans to expand Pop Shelf.

  • A new chain aimed at higher income, suburban customers.

  • - Pop Shelf, in addition to being located

  • in different places, it'll aim to sell things

  • that are more, think of more fun.

  • So not as much staples that you need to get by day to day,

  • but things like decorations, party supplies,

  • a little bit more fun than necessary.

  • - [Narrator] Dollar General says the new expansion

  • isn't necessarily a shift

  • from their overall growth strategy.

  • They say they can serve a diverse customer base

  • with stores in urban, rural, and suburban locations.

  • Yet, even as Dollar General expands its offerings

  • and target demographics,

  • the company expects that its core customers

  • will continue to be shoppers in small towns

  • without other options.

  • (fun quirky music)

- Dollar General's business model.

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Behind Dollar General's Strategy to Dominate Rural America | The Economics Of | WSJ

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    Kelly Lin posted on 2022/09/11
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