There aren’t a lot of grocery bargains to be had these days—unless you’re shopping at Dollar General. While competitor Dollar Tree has raised the price of many of its goods to $1.25, Dollar General is committed to keeping lots of items at just one buck, and even expanding its $1 offerings, while also expanding its grocery offerings. This decision and dedication reflect Dollar General’s recognition that its consistently low price offerings are counted on by “core customers” whose incomes are less than $40,000 per year, and who run out of cash in the last week of most months.
These customers are visiting stores more often, though they make fewer purchases during each visit, likely signaling their budgetary constraints. The stores are also attracting new, newly budget-conscious customers who are seeking less expensive groceries, as inflation is otherwise driving food prices up, and up, and up.
Currently, about 20 percent of Dollar General’s merchandise is selling for $1. The retail chain is working toward offering even more products at this price. It also is bolstering the fresh, refrigerated, and frozen foods that make up its DG Fresh initiative. The company is now self-distributing refrigerated and frozen foods across its 18,000-plus stores, and it plans to have fresh produce in 3,000 stores by year’s end, in an effort to compete with traditional supermarkets instead of convenience stores. In support of this initiative, Dollar General plans to install more than 65,000 refrigerator cooler doors this year.
It’s good for customers’ bottom line, and Dollar General’s, too. A second quarter report showed that sales had increased 9 percent to $9.4 billion, and same-store sales rose 4.6 percent. An updated full-year sales prediction indicates that full-year sales will increase about 11 percent, up from the previous estimate of 10 percent.
Discussion Questions:
- Why would Dollar General not raise its prices, even while its competitors are doing so?
- Is it good or bad for business, for Dollar General not to raise prices?
- Could Dollar General compete with traditional supermarkets? How should it go about doing so?
Sources: Matthew Stern, “Dollar General Plans to Expand Its Selection of $1 Items,” RetailWire, September 16, 2022; Heather Lalley, “Dollar General’s $1 Groceries Are Here to Stay,” CSP, September 14, 2022; Nathaniel Meyersohn, “Why Dollar Tree’s Price Hike to $1.25 Could Be ‘One of the Worst Decisions in Retail History’,” CNN, December 8, 2021; Nathaniel Meyersohn, “Rising Prices Are Pushing Shoppers to Dollar Stores,” CNN, June 8, 2022; Jon Springer, “Dollar General Plans to Self-Distribute Fresh, Frozen Foods,” CSP, March 18, 2019; Sam Silverstein, “Dollar General Bulks up on Perishables in Q4 as Overall Comps Wilt,” Grocery Dive, March 18, 2022; Marianne Wilson, “Dollar General Posts Strong Q2, Upbeat Guidance,” Progressive Grocer, August 26, 2022