Dollar General New Targets

 Unemployment in September was at 7.9% and we still have a ways to go for our economy to bounce back. So why is discount retailer Dollar General, right now, introducing a new concept to target wealthier shoppers?

Dollar General saw its in-store sales climb 18.8% in Q2 this year as it became a popular shopping destination for bargain-hunting consumers during this period of economic uncertainty. So why would this maneuver into higher-end retail in suburban locations make sense for a retailer whose brand (and recent growth) has revolved around affordability?

 

John Kelly, the CEO of walk-through marketing company Zenreach, thinks the following: “It is probably a very astute move on their part. There has been evidence of a trend that many urban dwellers are moving to the suburbs during this time of social distancing. Given that demographic shift and the increase in bargain-hunters due to the high unemployment rate, the decision to open stores in more demographically upscale neighborhoods seems like the right move to capture more market share.”  

I had a chance to interview him to learn more.

Why does it make sense for stores like Dollar General to target higher-income shoppers?

I think there are likely a couple of factors at play here. First, there has been evidence of a trend that many urban dwellers are moving to the suburbs during this time of remote working and social distancing. The second factor is that there has been an increase in bargain-hunting across the board—in city centers, in rural areas, and in the historically wealthier suburbs—due to high rates of unemployment and underemployment. 

 

Given these demographic and economic shifts, the decision to open stores in more demographically upscale neighborhoods seems like the right move to capture more market share.

 

 

What do stores like this do to attract higher-income customers?

This might actually be a strategy of following their customers and making sure that they can continue to deliver their value to their customers. And when those customers migrate to new, more affluent areas, it follows suit that the brand would expand their target market to address those new customer segments.  

 

With these notions in mind, the new retail chain will have to differentiate itself from a layout and offerings perspective—the in-store experience, from the design of the displays to the merchandise itself, should be catered to shoppers who view themselves as trendy, cosmopolitan, and savvy.

 

 

Do you think this is a permanent trend?

To me, this move by Dollar General is an opportunistic one—high unemployment and general economic uncertainty are making bargain hunters out of consumers who probably wouldn’t be as value-focused in a thriving, stable economy. So while I think building a discount brand around attracting higher-income customers makes sense right now, it’s hard to say whether this will be an enduring trend.