Dollar General Opening 975 Stores To Quench Food Deserts Thirst
Dollar General, the discount retailer that relies heavily on low-income shoppers, is expanding its presence with an additional 975 stores. As part of its nationwide expansion, DG will remodel 1K older stores with produce planned for about 200 of those locations. By adding a broader mix of food along with health and beauty products to its stores, could prove to be very profitable for the company.
The Breakdown You Need to Know
Last year, DG opened 900 new stores and 1,315 in 2017 and have continued to increase sales for 29 consecutive years. Dollar General has been targeting food deserts, low-income areas not served by supermarkets or nearby grocers as its next great growth opportunity. CultureBanxreported the U.S. Department of Agriculture claims that 23.5 million Americans live in food deserts.
They have strong ambitions to win over more low-end consumers by adding a broader mix of food to its stores. Average DG shoppers come from a household that earns $40,000 or less per year. In 2017, the U.S. Census Bureau released data showing the median income for an African American household was $39,490, putting them right in the Dollar General consumer sweet spot.
CEO Todd Vasos previously stated “Our remodel store delivers a 4% to 5% comp lift on average and a [Dollar General Traditional Plus] remodel delivers on average a 10% to 15% comp lift, and when produce is included in a DGTP, it delivers a comp lift on average at the high end of that range.”
Diversifying the Dollar
Typically Dollar General stores cost just $250K to open, meaning it’s easier for them to set up shop in rural areas. Their large network of stores which at last count stood at nearly 15,300 is supported by a robust business model that saw same-store sales increase 4% in Q4 of 2018. The company plans to invest more in digital ordering and grocery sales with DG Fresh and Fast Track.
In an effort to make sure sales continue to rise the company plans to beef up its health and beauty sections. If we look at the power of the black dollar across these consumables, black people spend nearly $54 million a year in the the ethnic hair and beauty space. When it comes to the broader market in personal appearance products, such as grooming aids and skin care preparations, black shoppers spent $127 million and $465 million respectively, according to Nielsen.
The retail sector has been hit hard with most companies facing declining stock prices and shuttering stores. Competitors such as Family dollar will close 400 stores this year.
This article originally appeared in Forbes.