Dollar General Works to Win Wealthier Shoppers

NEW YORK—Dollar General wants its budget-conscious shoppers to spend more in stores and to attract wealthier customers seeking bargains, so it is expanding its home furnishings, kitchenware and party supply offerings, reports CNN.

Dollar General has succeeded by offering everyday items at rock-bottom prices, often in rural areas of the country. More than three-quarters of Dollar General’s $25 billion in annual sales come from its “consumables” division: low-margin food, cleaning and household supplies and personal care products. But relying on the sale of selling cheap consumables has pinched its profits. Now, the company is introducing a new selection of higher-margin merchandise.

During the past year, Dollar General has added an assortment of pillows, candles, home decorations, gift bags and wrapping paper to more than 1,000 stores. Most items cost $5 or less and can be found in the center of the store where new signs and lower shelf heights make them easier to find. By the end of this year, Dollar General plans to offer these products in 2,400 stores—or 15% of the chain’s 15,000 U.S. locations.

The goal is to “get their existing customers to shop more” and attract new, wealthier shoppers, said Rupesh Parikh, analyst at Oppenheimer. Dollar General's core customers earn about $40,000 a year per household, more than $20,000 below the national average.

Dollar General is modeling its home and party departments after the ones found at TJMaxx, Burlington and Ross, outlets that have created a treasure hunt-like feel inside. Dollar General wants to create a “sense of urgency” for customers by rotating in new products frequently, said Todd Vasos, CEO, Dollar General. “If a customer has come in 20 times and [seen] the same lamp, they’re probably not going to buy at the 21st time.” 

Dollar General wants to capitalize on the struggles of rival Dollar Tree, which gets a higher percentage of its sales from home products and party goods than Dollar General. To that end, Dollar General is adding produce sections, healthier snacks and a new private-label cosmetics brand to thousands of stores. The discount chain has recently struck partnerships with FedEx for package drop-offs and pickups and Western Union for wire transfers in stores.

Merchandising