Dollar General Continues Growing Fresh Grocery Category

The chain attracts customers with groceries and competitive prices.

August 25, 2020

GOODLETTSVILLE, Tenn.—Since January 2019 when Dollar General began rolling out groceries to stores, the Tennessee-based retailer has attracted more consumers and gone toe-to-toe with rivals Walmart and Whole Foods, reports BusinessInsider.com.

For Dollar General, grocery is the key to continuing its ongoing expansion. The chain enjoyed an excellent few months as cost-conscious shoppers flocked to the outlets during the pandemic. Now, the company is making several big moves for the future and post-COVID-19 world.

As NACS Daily reported earlier in August, Dollar General has announced plans to build three new cold storage distribution facilities. The warehouses—located in Bowling Green, Ky.; Ardmore, Okla.; and West Sacramento, Calif.—will house products like frozen goods, milk, cheese and deli meats to support a network of 1,500 stores. This move is Dollar General's latest barrage around its DG Fresh initiative. 

The DG Fresh initiative put fresh- and frozen-food options in the stores, which traditionally lacked a grocery element. Currently, Dollar General delivers grocery products to more than 9,000 of its total 16,500 locations. In May, Todd Vasos, CEO, Dollar General, said that so far, the company "is seeing the substantial cost benefit we expected."

Questions remain over why the leading dollar store chain wants to break into the grocery industry, a business famous for notoriously thin profit margins. In part, the answer lies within the chain’s ambitions. Dollar stores have traditionally been associated with lower income communities and economic downturns, but Dollar General is seeking broader appeal.

"In recent years, the dollar channel has attracted a younger, more diverse consumer base," Christopher McGovern, senior consultant at Numerator. "And it's not just low income—middle- and higher-income groups are electing to shop at dollar stores, as they recognize the lower price points for similar quality products that they would find in their regular grocery or big box store."

Dollar General has enjoyed some early success when facing off against one of the most formidable forces in all of retail: Walmart. Foot traffic analytics firm Placer.ai said that while "competition is near impossible" against Walmart, Dollar General is managing to give the big-box giant "a nudge on the cheaper side of the market."

The research company found that Dollar General's "cross-shopping" visits from Walmart customers spiked in 2020. Between May and July of 2019, 19.4% of Walmart shoppers also swung by a Dollar General store. In 2020, that has increased to 24.2%, which Placer.ai characterized as "a huge shift considering the massive number of Walmart visitors."

This month, the Newton County Enterprise newspaper profiled property owners Bill and Peggy Lah, who praised the company's grocery offerings after striking a deal to build Dollar General in Goodland, Ind. Bill Lah said that Goodland residents were accustomed to living "miles away from access to basic groceries, household and general health items." Dollar General was the solution to that issue in his mind.

"If you look at the USDA's definition of a 'food desert,' that is us," he said. "We have been living in that world for too long, and it ultimately has impacted our attractiveness as a place of choice for people to live. My goal is, that when we enter the new year of 2021, that families will be able to do the bulk of their basic grocery shopping right here in Goodland."

To read more about dollar stores and the impact they are having within the convenience store industry, read “The Buck Stops Where?” in the October 2019 issue of the NACS Magazine.

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