Trade-Down Shoppers Encounter ‘A Different Dollar General’

Benefiting from long-standing equity in value combined with more recent investments making stores fresher and more efficient, Dollar General officials are feeling good about the company’s positioning as a U.S. recession takes hold.

Speaking in a conference this week, CEO Todd Vasos said that combination of factors—which has accompanied an increase in federal food benefit dollars and stimulus payments that historically tends to benefit regular shoppers of Dollar General—is also driving a new wave of wealthier “trade-down” shoppers to the brand. These consumers are pleased with what they’re finding at the compact discounter’s stores, including expanded selections of fresh and frozen foods and a larger variety of pack sizes enabled in part by better category management practices, a massive increase in cooler space and newly added conveniences in some stores, such as self-checkout and online shopping pickup, than the last time a recession came around.

“We’re seeing a fair amount of trade-down come into Dollar General, and that trade-down is really coming in from that group of consumers that are just [economically] above our core consumers,” Vasos said during Oppenheimer’s 20th annual Consumer Conference on June 17, according to a Sentieo transcript. Vasos described these shoppers as those with household incomes of $50,000 to $55,000 per year—or about $10,000 to $15,000 more than Dollar General’s core shopper.

This group is driving recent volume growth at the Goodlettsville, Tenn.-based retailer, Vasos continued, citing credit card spending data through May 24.

While precise figures for Dollar General weren’t immediately available, a spokesman for Commerce Signals, a credit and debit spending tracking system, told WGB its sales were included in a channel category indicating purchase dollars were up by 15% for the week ending May 30 and 15.3% for the week ending June 6. 

“If you take a look at our data, it would suggest that we are … one of the fastest-growing retailers out there right now in units and, of course, in dollars,” Vasos said. “And that’s really being propelled by that trade-down as well as the stimulus money that I believe is out there.”

This new shopper, Vasos predicted, would be “sticky” given moves to have increased the relevancy of the Dollar General offering since the last time a recession struck the U.S. in 2008. “That consumer sees a different Dollar General than she ever remembers,” he said. “This box is so relevant to that core consumer that ... it makes perfect sense for her to resonate with that box. And it obviously has, because of the repeat we’ve seen.”

Contrasting the food offerings between the onset of the 2008 recession and today’s, Vasos noted that when he arrived at the company in 2008, Dollar General’s stores had an average of five cooler doors per store. “We’re now up to 20-plus, and we're building stores with 26 to 36 cooler doors, depending on the size and volume that we anticipate experiencing.

“The cooler initiative has been fabulous on many fronts, to include bigger baskets, to include more well-rounded baskets and, of course, to attract and retain new consumers,” Vasos said. “I would tell you that I believe we’re in the fourth inning of this ballgame. And that … gives us great confidence that this will be the gift that keeps on giving for the next four, five or six years to come, if not longer.”

A separate effort to self-distribute items stocked in those units—known internally as DG Fresh—is also making the expansion of food more profitable for the retailer, while reducing issues with out-of-stocks and improving brand variety, Vasos added, saying the initiative adding 50 basis points to gross margin expansion reported in the retailer’s last fiscal quarter and better in-stock results for stores participating in the newly rolled out program.