It's been another strong year for Dollar General (NYSE: DG). Like many of its discount store counterparts, Dollar General has thrived during the pandemic as many higher-priced retailers saw their revenue decline.
In fact, rampant stores closures have been hitting real estate investors hard since early 2020. But Dollar General isn't shuttering locations. Quite the contrary -- it's building on its expansion plans, to the point where its footprint is growing faster than any other retailer.
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For the current year, Dollar General is on pace to add 50 locations for Popshelf, its higher-end store. And the discount-store giant is aiming to open 1,000 Popshelf locations by the end of fiscal 2025.
Popshelf only first launched last year, but so far, annualized sales have been higher than first-year sales at a traditional Dollar General location. And it's just one example of what Dollar General is doing right. In fact, here's why Dollar General is enjoying such success at a time when other retailers are struggling.
1. It's catering to different price points
Dollar General's core consumer base is budget-conscious shoppers. But with its Popshelf brand, it's drawing in a whole new audience.
Some consumers may have previously shied away from shopping at Dollar General due to their perception of the quality of the retailer's inventory. But if those same customers visit Popshelf locations and find themselves impressed with what they see, they may be more apt to give Dollar General's standard stores a chance -- even if they can afford to spend more on essentials.
2. It's capitalizing on pandemic shopping trends
During the pandemic, many people have been forced to focus their limited funds on essentials. But those with discretionary income have largely favored things over experiences -- namely home goods, which Popshelf now features.
Thanks to the outbreak, many people are spending more time at home than ever before. They're working from home, dining at home instead of at restaurants, and vacationing at home to limit their COVID-19 exposure. Dollar General is doing a great job of catering to this trend.
3. It's sticking to its roots
At the end of the day, Dollar General is a discount brand, and at a time when inflation is rampant, that could really work to its advantage. In November, the cost of consumer goods was up 6.8% from the previous year, per the Consumer Price Index. And experts warn that inflated prices could be with us well into 2021.
By limiting its price point at its Popshelf locations, Dollar General is doing its part to retain loyal customers and entice new consumers who may now be in a position where they have to seek out lower prices. But to be clear, low prices aren't just an inflation-driven fad. They're something cash-strapped consumers seek out all the time, which means no matter the economic backdrop, Dollar General really can't go wrong.
Other retailers can take a lesson from Dollar General
For some retailers, sticking with a specific product line or price point may make sense given their desired audience or business model. But clearly, Dollar General has enjoyed its share of success via the moves above. And struggling retailers may want to adopt similar strategies if they want to avoid financial struggles at a time when consumer habits are changing.
