“THEY want to build one every four miles,” says the cashier at Dollar General, a discount shop, in Lewisburg, a small town in the rolling hills of central Tennessee. Situated on a big parking lot, next to a provider of payday loans open 24 hours a day, a supermarket chain called Priceless and Dirt Cheap, another southern chain of discount shops flogging the unsold or returned merchandise of other retailers, the shop is one of three Dollar Generals in Lewisburg. Tennessee is the home state of Dollar General, which in recent years overtook its rivals to become the retailer of choice of low-income Americans, so it has one of the denser statewide networks of shops. Yet with well over 14,000 outlets across America (about the same number as there are McDonald’s restaurants) almost 75% of Americans now live within five miles of a Dollar General.
“Over the last five years a new Dollar General opened every four-and-a-half hours,” says Garrick Brown at Cushman & Wakefield, a property agent. The chain’s profits have risen like a helium balloon since the recession, to more than double those of Macy’s, one of the most famous brands in retail, in the past fiscal year. Its market value is a whopping $28bn.
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How does Dollar General thrive when so many other retailers are struggling, downsizing or, in the case of Sears, Bon-Ton, 99 Cents Only, Neiman Marcus, Land’s End, Nine West and J. Crew, are close to bankruptcy? One reason is that it filled a void. “They set up shop where Walmart does not want to make an effort,” says Christopher Merrett at the Illinois Institute for Rural Affairs, referring to the world’s biggest retailer. Around 70% of Dollar General’s customers live in rural places which have been slow to recover from the recession. Another reason for its success is that it caters to those who are financially stretched. Dollar General sells everything from packaged food and toys to linens and household-cleaning products, but in smaller packages for those who cannot afford to buy in bulk. And although, contrary to popular belief, not all items cost a dollar, a quarter of them do; three-quarters cost less than $5, and most of the rest will set you back less than $10.
Dollar General promises low prices and quick, convenient shopping, but so do other dollar stores, such as Dollar Tree, Family Dollar or the near-bankrupt 99 Cents Only. Their secret sauce, explains Mike Paglia at Kantar, a retail consultant, is to pick a good site. They vet them diligently, opening their shops next to highways, post offices, churches or schools. (A church close to the array of deep discounters in Lewisburg assures its worshippers that “God has a 100% refund policy”.) In Uptown, a down-at-heel neighbourhood in Chicago that is home to one of the few Dollar Generals in big cities, the company picked a spot behind a big parking lot next to a Shell petrol station, a branch of Chase, Chicago’s most popular bank, and Planned Parenthood, a non-profit offering advice on family planning.
The typical Dollar General shopper is white, working class and tends to rely on some form of government assistance. “The economy is continuing to create more of our core customer,” the company’s chief executive, Todd Vasos, told the Wall Street Journal in an unguarded moment in December. He is also likely to be a supporter of President Donald Trump, says Mr Merrett, although this is changing as rural America gains pockets of diversity, for example next to slaughterhouses such as Tyson’s plant in Storm Lake, Iowa. Dollar General has tried to expand in ethnically diverse, left-leaning cities: in 2015 it tried to buy the more urban Family Dollar. Last year it took over 322 mostly urban stores from a private-equity firm that had bought them from Dollar Tree, which had trumped Dollar General in the battle over Family Dollar and needed to shrink a bit for antitrust reasons. The new urban shops will be laboratories for a different type of customer. On a frigid evening just before Christmas, the shoppers at Dollar General’s Uptown outlet were mostly black or brown—and almost certainly Democrats.
Dollar General intends to continue its vertiginous expansion, with plans to open another 900 shops this year. Yet rural communities account for only 46m, or 15%, of the population—and they are shrinking fast. Many small towns have only 75% of the population they had 25 years ago. In 33 counties in Illinois, the population peaked over a century ago, says Mr Merrett. To keep expanding so rapidly, Dollar General will need to appeal to those with a higher income than the working poor. It has already made inroads into more affluent groups. According to Nielsen, a marketing researcher, 43% of customers with household income of $29,000 or less but also 23% of those earning more than $70,000 said they shopped at a dollar store in 2016. The new shop in Lewisburg is on Yell Road, which is lined with pretty houses and big gardens; the cars parked in front of the shop are mostly gleaming SUVs and big pickup trucks. The “market” outlet offers fresh shrimp, Chobani yogurts and other fancy foodstuffs.
Walmart’s rapid rise caused resentment in rural communities as it killed smaller local shops and was said to treat its workers poorly. Dollar General, however, ventures into places where the last grocery shop often closed years ago, which is why its reception by locals tends to be much friendlier. The same is likely to be true as Dollar General expands into troubled urban neighbourhoods such as Chicago’s South Side, where rents are cheap. In these so-called food deserts, an investment by any retailer is good news.
This article appeared in the United States section of the print edition under the headline "One buck at a time"